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<SEC-DOCUMENT>0000944075-10-000022.txt : 20100517
<SEC-HEADER>0000944075-10-000022.hdr.sgml : 20100517
<ACCEPTANCE-DATETIME>20100517132642
ACCESSION NUMBER:		0000944075-10-000022
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20100331
FILED AS OF DATE:		20100517
DATE AS OF CHANGE:		20100517

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SOCKET MOBILE, INC.
		CENTRAL INDEX KEY:			0000944075
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRONIC COMPUTERS [3571]
		IRS NUMBER:				943155066
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-25904
		FILM NUMBER:		10837200

	BUSINESS ADDRESS:	
		STREET 1:		39700 EUREKA DRIVE
		CITY:			NEWARK
		STATE:			CA
		ZIP:			94560-4808
		BUSINESS PHONE:		5109333000

	MAIL ADDRESS:	
		STREET 1:		39700 EUREKA DRIVE
		CITY:			NEWARK
		STATE:			CA
		ZIP:			94560-4808

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	SOCKET COMMUNICATIONS INC
		DATE OF NAME CHANGE:	19950418
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>q1-2010.htm
<DESCRIPTION>10-Q
<TEXT>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<!-- saved from url=(0042)file://N:\STMNTS\SEC\2002_06_Q\q2-2002.htm -->
<!-- saved from url=(0042)file://N:\STMNTS\SEC\2002_03_Q\q1-2002.htm --><HTML><HEAD><TITLE>10q doc</TITLE>

<META content="MSHTML 5.50.4522.1800" name=GENERATOR></HEAD>
<BODY bgColor=white>
<DIV align=left> </DIV>
<DIV align=left> </DIV>
<P align=center><font face="Times New Roman, Times, serif" size="3">UNITED STATES<BR>
  SECURITIES AND EXCHANGE COMMISSION<BR>
  WASHINGTON, D.C. 20549<BR>
  </font></P>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG>FORM
  10-Q</STRONG></font></P>
<TABLE cols=2 width="100%">
  <TR>
    <TD vAlign=top width="5%"><FONT size=3><STRONG>
      <CENTER>
        <font face="Times New Roman, Times, serif"> [X] </font>
      </CENTER>
      </STRONG></FONT></TD>
    <TD vAlign=top width="95%"><font size="3" face="Times New Roman, Times, serif"><b>QUARTERLY
      REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.</b></font></TD>
  </TR>
</TABLE>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG>&nbsp;&nbsp;For
  the quarterly period ended March 31, 2010</STRONG></font></P>
<P align=center><font size="3" face="Times New Roman, Times, serif"><STRONG>OR</STRONG></font></P>
<TABLE cols=2 width="100%">
  <TR>
    <TD vAlign=top width="5%"><FONT size=3><STRONG>
      <CENTER>
        <FONT face="Times New Roman, Times, serif">[&nbsp;&nbsp;&nbsp;] </FONT>
      </CENTER>
      </STRONG></FONT></TD>
    <TD vAlign=top width="95%"><FONT face="Times New Roman, Times, serif"
      size=3><b>TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.</b><BR>
      <BR>
      For the transition period ____________ to ____________ </FONT></TD>
  </TR>
</TABLE>
<P align=center><font face="Times New Roman, Times, serif" size="3"><b>Commission
  file number 1-13810</b></font></P>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG><b><font size="6">SOCKET
  MOBILE, INC.</font></b></STRONG><BR>
  (Exact name of registrant as specified in its charter)</font></P>
<P>&nbsp;
<TABLE cols=2 width="100%">
  <TR>
    <td width="47%"><font size=3><strong>
      <center>
        <font face="Times New Roman, Times, serif" size="3">Delaware </font>
      </center>
      </strong></font></td>
    <TD width="17%"><font face="Times New Roman, Times, serif"></font></TD>
    <TD width="36%"><FONT size=3><STRONG>
      <CENTER>
        <font face="Times New Roman, Times, serif" size="3">94-3155066 </font>
      </CENTER>
      </STRONG></FONT></TD>
  </TR>
  <TR>
    <td width="47%"><font size=2>
      <center>
        <font size="3" face="Times New Roman, Times, serif">(State of incorporation)</font>
      </center>
      </font></td>
    <TD width="17%"><font face="Times New Roman, Times, serif"></font></TD>
    <TD width="36%"><FONT size=2>
      <CENTER>
        <font size="3" face="Times New Roman, Times, serif">(IRS Employer Identification
        No.) </font>
      </CENTER>
      </FONT></TD>
  </TR>
</TABLE>
<font face="Times New Roman, Times, serif" size="3"><BR>
</font>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG>39700
  Eureka Drive, Newark, CA 94560</STRONG><BR>
  (Address of principal executive offices including zip code)</font></P>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG>(510)
  933-3000</STRONG><BR>
  (Registrant's telephone number, including area code)<BR>
  </font></P>
<P><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp; </font>
<P><font face="Times New Roman, Times, serif">Indicate by check mark whether the
  registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
  of the Securities Exchange Act of 1934 during the preceding 12 months (or for
  such shorter period that the registrant was required to file such reports),
  and (2) has been subject to such filing requirements for the past 90 days. YES
  [ X ] NO [ ]</font></P>
<P><font face="Times New Roman, Times, serif">Indicate by check mark whether the
  registrant has submitted electronically and posted on its corporate Web site,
  if any, every Interactive Data File required to be submitted and posted pursuant
  to Rule 405 of Regulation S-T (&sect;232.405 of this chapter) during the preceding
  12 months (or for such shorter period that the registrant was required to submit
  and post such files). YES [ ] NO [ ]</font></P>
<P><font face="Times New Roman, Times, serif">Indicate by check mark whether the
  registrant is a large accelerated filer, an accelerated filer, a non-accelerated
  filer, or a smaller reporting company. See the definitions of &quot;large accelerated
  filer,&quot; &quot;accelerated filer,&quot; and &quot;smaller reporting company&quot;
  in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer
  [ ] Non-accelerated filer [ ] Smaller reporting company [X]</font></P>
<P><font face="Times New Roman, Times, serif">Indicate by check mark whether the
  registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
  YES [ ] NO [X]</font></P>
<P>The number of shares of Common Stock ($0.001 par value) outstanding as of May
  7, 2010 was 3,793,879 shares.</P>
<hr width="100%">
<div align="center"></div>
<P align=left><font face="Times New Roman, Times, serif" size="3"><a name="tab"></a></font></P>
<table width="879" border="0" cellspacing="0" cellpadding="0" align="center">
  <tr>
    <td colspan="3">
      <div align="center"></div>
      <p align=center><font face="Times New Roman, Times, serif" size="3"><strong>INDEX
        </strong></font></p>
    </td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3"><u>PAGE
        <br>
        NO.</u></font></div>
    </td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif">Part I. Financial
      Information</font></td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif">Item 1. Financial
      Statements (Unaudited):</font></td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56" align="center" valign="bottom"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#bs">Condensed Balance Sheets - March 31, 2010 and December 31, 2009 </a></font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center"><font face="Times New Roman, Times, serif">1</font></div>
    </td>
  </tr>
  <tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56" align="center" valign="bottom"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <td width="27" height="10"><font face="Times New Roman, Times, serif"></font></td>
  <td width="807" height="10"><font face="Times New Roman, Times, serif" size="3"><a
  href="#ops">Condensed Statements of Operations - Three Months Ended March 31,
    2010 and 2009</a></font></td>
  <td width="56" height="10" align="center" valign="bottom">
    <div align="center"><font face="Times New Roman, Times, serif"> 2</font></div>
  </td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56" align="center" valign="bottom"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#flows">Condensed Statements of Cash Flows - Three Months Ended March
      31, 2010 and 2009</a></font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center"><font face="Times New Roman, Times, serif">3</font></div>
    </td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56" align="center" valign="bottom"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#notes">Notes to Condensed Financial Statements</a> </font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center"><font face="Times New Roman, Times, serif">4</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#mda">Item 2. Management's Discussion and Analysis of Financial Condition
      and Results of Operations</a> </font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">13</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#qqd">Item 3. Quantitative and Qualitative Disclosures about Market Risk</a>
      </font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif">22</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#item4">Item 4T. Controls and Procedures</a></font> </td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif">23</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="3">
      <div align="left"> <font face="Times New Roman, Times, serif" size="3"><a
href="#oth">Part II. Other Information</a></font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#risk">Item 1A. Risk Factors</a></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">24</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#item6">Item 6. Exhibits</a></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif">36</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#sig">Signatures</a></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif">37</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#ind">Index to Exhibits</a></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">38</font></div>
    </td>
  </tr>
</table>
<P align=left>&nbsp; </P>
<P align="center"><font face="Times New Roman, Times, serif" size="3"><BR>
  <BR>
  </font>
<HR width="100%">
<font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a>
<a
name=bs></a> <BR>
<BR>
</font>
<P align=left><font face="Times New Roman, Times, serif" size="3"><b>Item 1. Financial
  Statements</b></font>
<div align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; "><font face="Times New Roman, Times, serif"><b>SOCKET
  MOBILE, INC.</b> <br>
  <b>CONDENSED BALANCE SHEETS</b> </font></div>
<center>
  <table width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 12pt; ">
    <tr style="font-size: 8.0pt;">
      <td colspan="2" align="left" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td colspan="2" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">March
        31,<br>
        2010<br>
        (unaudited)<br>
        </font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10">&nbsp;</td>
      <td colspan="2" align="center" valign="top" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><br>
        December 31,<br>
        2009*</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr valign="bottom">
      <td colspan="10" align="center" valign="top" bgcolor="#cceeff"> <font face="Times New Roman, Times, serif" size="3"><b>ASSETS</b></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">Current
        assets:</font></td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" bgcolor="#CCEEFF">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Cash
          and cash equivalents</font></div>
      </td>
      <td bgcolor="#CCEEFF">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3">1,982,524</font></td>
      <td bgcolor="#CCEEFF">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3">1,940,295</font></td>
      <td bgcolor="#CCEEFF">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accounts
          receivable, net</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">2,919,608</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">1,659,383</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Inventories</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,617,019</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,044,119</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Prepaid
          expenses and other current assets</font></div>
      </td>
      <td>&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">540,641</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">415,102</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td bgcolor="#CCEEFF" height="18">&nbsp;</td>
      <td align="left" valign="top" bgcolor="#CCEEFF" height="18">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets</font></div>
      </td>
      <td bgcolor="#CCEEFF" height="18">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">7,059,792</font></td>
      <td bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10" height="18" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">6,058,899</font></td>
      <td bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td bgcolor="#FFFFFF">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF">&nbsp;</td>
      <td bgcolor="#FFFFFF">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF">&nbsp;</td>
      <td align="right" nowrap bgcolor="#FFFFFF">&nbsp;</td>
      <td bgcolor="#FFFFFF">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#CCEEFF" height="8"><font face="Times New Roman, Times, serif" size="3">Property
        and equipment:</font></td>
      <td bgcolor="#cceeff" height="8">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff" height="8">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" height="8">&nbsp;</td>
      <td bgcolor="#cceeff" height="8">&nbsp;</td>
      <td width="10" height="8" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff" height="8">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff" height="8">&nbsp;</td>
      <td bgcolor="#cceeff" height="8">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Machinery
          and office equipment</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">2,178,351</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">2,165,775</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Computer
          equipment</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">1,271,271</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">1,253,511</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp</font>
        </div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,449,622</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,419,286</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accumulated
          depreciation</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">(2,739,478</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">(2,631,822</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td bgcolor="#FFFFFF">&nbsp;</td>
      <td align="left" valign="top" bgcolor="#FFFFFF">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment, net</font></div>
      </td>
      <td bgcolor="#FFFFFF">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">710,144</font></td>
      <td bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">787,464</font></td>
      <td bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3">Intangible
        assets, net</font></td>
      <td bgcolor="#FFFFFF" height="8">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" height="8">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3">255,000</font></td>
      <td bgcolor="#FFFFFF" height="8">&nbsp;</td>
      <td width="10" height="8">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" height="8">&nbsp;</td>
      <td align="right" nowrap bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3">270,000</font></td>
      <td bgcolor="#FFFFFF" height="8">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">Goodwill</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">4,427,000</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">4,427,000</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3">Other
        assets</font></td>
      <td bgcolor="#FFFFFF">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">185,667</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">199,834</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td bgcolor="#CCEEFF">&nbsp;</td>
      <td align="left" valign="top" bgcolor="#CCEEFF">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets</font></div>
      </td>
      <td bgcolor="#CCEEFF">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">12,637,603</font></td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" style="border-bottom: 3px double #000000">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">11,743,197</font></td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" style="border-bottom: 3px double #000000">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="10"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="10" align="center" valign="top" bgcolor="#cceeff"> <font face="Times New Roman, Times, serif" size="3"><b>LIABILITIES
        AND STOCKHOLDERS&#146; EQUITY</b></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="14"><font face="Times New Roman, Times, serif" size="3">Current
        liabilities:</font></td>
      <td height="14">&nbsp;</td>
      <td align="left" valign="bottom" height="14">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="14">&nbsp;</td>
      <td height="14">&nbsp;</td>
      <td height="14" width="10">&nbsp;</td>
      <td align="left" valign="bottom" height="14">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="14">&nbsp;</td>
      <td height="14">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accounts
          payable</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">4,006,874</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,902,294</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accrued
          payroll and related expenses</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">949,963</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">806,750</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Bank
          line of credit</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,466,809</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" bgcolor="#cceeff" nowrap><font face="Times New Roman, Times, serif" size="3">1,002,088</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Deferred
          income on shipments to distributors</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">909,498</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" nowrap><font face="Times New Roman, Times, serif" size="3">917,756</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr bgcolor="#cceeff">
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Short
          term portion of deferred service revenue</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">342,539</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">304,193</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Short
          term portion of capital leases and deferred rent</font></div>
      </td>
      <td>&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">45,796</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">42,491</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td>&nbsp;</td>
      <td align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;Total
          current liabilities</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">7,721,479</font></td>
      <td bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10" height="18" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">5,975,572</font></td>
      <td bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom" bgcolor="#cceeff">
      <td colspan="2" align="left" valign="top"><font size="3">Long term portion
        of deferred service revenue</font></td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">309,079</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" nowrap><font face="Times New Roman, Times, serif" size="3">282,840</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="8"><font size="3">Long
        term portion of capital leases and deferred rent</font></td>
      <td>&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" valign="bottom"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">84,486</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" valign="bottom"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">96,785</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr bgcolor="#cceeff">
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Total
          liabilities</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">8,115,044</font></td>
      <td style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">6,355,197</font></td>
      <td style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr>
      <td colspan="10"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr bgcolor="#cceeff">
      <td colspan="2" align="left" valign="top" height="8"><font face="Times New Roman, Times, serif" size="3">Commitments
        and contingencies</font></td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="8"><font face="Times New Roman, Times, serif" size="3">Stockholders'
        equity:</font></td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
    </tr>
    <tr bgcolor="#cceeff">
      <td colspan="2" align="left" valign="top" height="19">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
          stock, $0.001 par value: Authorized shares&#151;10,000,000,</font></div>
      </td>
      <td height="19">&nbsp;</td>
      <td align="left" valign="bottom" height="19">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="19">&nbsp;</td>
      <td height="19">&nbsp;</td>
      <td width="10" height="19">&nbsp;</td>
      <td align="left" valign="bottom" height="19">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="19">&nbsp;</td>
      <td height="19">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="18">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issued
          and outstanding shares&#151;3,792,910 at March 31, 2010 and 3,788,767
          at December 31, 2009</font></div>
      </td>
      <td height="18">&nbsp;</td>
      <td align="left" valign="bottom" height="18">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="18"><font face="Times New Roman, Times, serif" size="3">3,793</font></td>
      <td height="18">&nbsp;</td>
      <td width="10" height="18">&nbsp;</td>
      <td align="left" valign="bottom" height="18">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="18"><font face="Times New Roman, Times, serif" size="3">3,789</font></td>
      <td height="18">&nbsp;</td>
    </tr>
    <tr valign="bottom" bgcolor="#cceeff">
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional
          paid-in capital</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">56,363,468</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" nowrap><font face="Times New Roman, Times, serif" size="3">56,190,112</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated
          deficit</font></div>
      </td>
      <td>&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">(51,844,702</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
      <td width="10">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">(50,805,901</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td>&nbsp;</td>
      <td align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;Total
          stockholders&#146; equity</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">4,522,559</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">5,388,000</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td align="left" valign="top"><font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
        liabilities and stockholders&#146; equity</font></td>
      <td>&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">12,637,603</font></td>
      <td align="left" style="border-bottom: 3px double #000000">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">11,743,197</font></td>
      <td align="left" style="border-bottom: 3px double #000000">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="10" align="left" valign="top" height="8">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="2" face="Times New Roman, Times, serif">_____________________________________________<br>
          * Derived from audited financial statements.</font></div>
      </td>
    </tr>
  </table>
</center>
<P align=left>&nbsp;
<P align=center>
<P align=center>
<P></P>
<P align=center><font face="Times New Roman, Times, serif" size="3">See accompanying
  notes.<BR>
  <BR>
  1</font>
<HR width="100%">
<font face="Times New Roman, Times, serif" size="3"><BR>
<a href="#TAB">(Index)</a> <a name=ops></a><BR>
</font>
<div align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; "><font face="Times New Roman, Times, serif"><b><font size="3">SOCKET
  MOBILE, INC.</font></b> <font size="3"><br>
  <b>CONDENSED STATEMENTS OF OPERATIONS<br>
  </b>(Unaudited)</font><br>
  </font></div>
<div align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff; margin-top: 2pt; margin-left: 0; margin-right: 0; margin-bottom: 0; "></div>
<center>
  <table width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 12pt; ">
    <tr>
      <td colspan="3">&nbsp;</td>
      <td width="2%">&nbsp;</td>
      <td align="center" nowrap colspan="7"><font face="Times New Roman, Times, serif" size="3">Three
        Months Ended March&nbsp;31,</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" nowrap>&nbsp;</td>
      <td width="2%">&nbsp;</td>
      <td colspan="2" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2010</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="1%">&nbsp;</td>
      <td colspan="2" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2009</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Revenues</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" width="11%"><font face="Times New Roman, Times, serif" size="3">3,807,149</font></td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap bgcolor="#cceeff" width="11%"><font face="Times New Roman, Times, serif" size="3">4,771,890</font></td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Cost of revenues</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">2,201,689</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="1%">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">2,546,437</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Gross profit</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">1,605,460</font></td>
      <td width="1%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" nowrap width="11%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2,225,453</font></td>
      <td width="1%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Operating expenses:</font></div>
      </td>
      <td width="2%" bgcolor="#CCEEFF">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#CCEEFF">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#CCEEFF">&nbsp;</td>
      <td width="1%" bgcolor="#CCEEFF">&nbsp;</td>
      <td width="1%" bgcolor="#CCEEFF">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#CCEEFF">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#CCEEFF">&nbsp;</td>
      <td width="1%" bgcolor="#CCEEFF">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" height="18">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research
          and development</font></div>
      </td>
      <td height="18" width="2%">&nbsp;</td>
      <td align="left" valign="bottom" height="18" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="18" width="11%"><font face="Times New Roman, Times, serif" size="3">681,520</font></td>
      <td height="18" width="1%">&nbsp;</td>
      <td height="18" width="1%">&nbsp;</td>
      <td align="left" valign="bottom" height="18" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="18" width="11%"><font face="Times New Roman, Times, serif" size="3">776,474</font></td>
      <td height="18" width="1%">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
          and marketing</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,239,367</font></td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,413,842</font></td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
          and administrative</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">660,625</font></td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">641,999</font></td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
          of intangible assets</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">15,000</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">31,787</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td width="5%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Total operating expenses</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">2,596,512</font></td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">2,864,102</font></td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="2%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Operating loss</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td align="right" valign="bottom"  width="2%">
        <div align="right"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td align="right" valign="bottom" nowrap  width="11%"><font face="Times New Roman, Times, serif" size="3">(991,052</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom"  width="2%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap  width="11%"><font face="Times New Roman, Times, serif" size="3">(638,649</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp</font>
        </div>
      </td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Interest income</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">34</font></td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">350</font></td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Interest expense</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(47,783</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(65,431</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" height="14">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp</font>
          <font face="Times New Roman, Times, serif" size="3">&nbsp</font> <font size="3" face="Times New Roman, Times, serif">&nbsp</font></div>
      </td>
      <td width="2%" height="14">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" height="14">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" height="14">&nbsp;</td>
      <td width="1%" height="14">&nbsp;</td>
      <td width="1%" height="14">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" height="14">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" height="14">&nbsp;</td>
      <td width="1%" height="14">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" height="14" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Net loss before deferred taxes</font></div>
      </td>
      <td height="14" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" height="14" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="14" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(1,038,801</font></td>
      <td height="14" width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td height="14" width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" height="14" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap height="14" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(703,730</font></td>
      <td height="14" width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Deferred tax expense</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">---</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="1%">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">(7,985</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" height="16" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Net loss</font></div>
      </td>
      <td width="2%" height="16" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff" valign="bottom"><font size="3" face="Times New Roman, Times, serif">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(1,038,801</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" valign="bottom"><font size="3" face="Times New Roman, Times, serif">)</font></td>
      <td width="1%" height="16" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff" valign="bottom"><font size="3" face="Times New Roman, Times, serif">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(711,715</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" valign="bottom"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td valign=bottom align=left width="2%" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td valign=bottom align=left width="2%" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Net loss per share:</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" height="10" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(0.27</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">)</font></td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(0.22</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">(0.27</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%"><font size="3" face="Times New Roman, Times, serif">)</font></td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">
        (0.22</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    </tr>
    <tr>
      <td colspan="3" bgcolor="#cceeff"><font style="font-size: 10pt" face="Times New Roman, Times, serif" size="3">&nbsp;</font><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Weighted average shares outstanding:</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" height="10" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic
          and diluted</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,788,990</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,229,916</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    </tr>
  </table>
</center>
<P align=center>
<p>&nbsp;</p>
<P align=center><font face="Times New Roman, Times, serif" size="3">See accompanying
  notes. <BR>
  <BR>
  </font>
<P align=center>
<P align=center><font face="Times New Roman, Times, serif" size="3"> 2</font>
<HR width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=flows></a></font> </p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif"><b>SOCKET MOBILE,
  INC.<br>
  CONDENSED STATEMENTS OF CASH FLOWS<br>
  </b>(Unaudited)</font></p>
<table style="MARGIN-TOP: 6pt; FONT-SIZE: 9.6pt" cellspacing=0 cellpadding=0
width="100%" align=center border=0>
  <tr style="FONT-SIZE: 10pt">
    <td colspan=4>&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td noWrap align=middle colspan=7>
      <div align="center"><font face="Times New Roman, Times, serif" size="3">Three
        Months Ended March&nbsp;31,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 10pt">
    <td noWrap align=left colspan=4>&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td noWrap align=middle colspan=2 style="border-bottom: 1px solid #000000">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">2010</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td noWrap align=middle colspan=2 style="border-bottom: 1px solid #000000">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">2009</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div
    style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Operating
        activities</b></font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Net loss</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3">(1,038,801</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right width="11%"><font face="Times New Roman, Times, serif" size="3">(711,715</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Adjustments to reconcile net loss to net cash provided by (used in) operating
        activities:</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based
        compensation</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">165,240</font></td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">152,520</font></td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
        and amortization</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">123,812</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">122,789</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
        of intangible assets</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">15,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">31,787</font></td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
        foreign currency transaction gains</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(18,632</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(11,666</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
        tax expense</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">7,985</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change
        in deferred rent</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(5,985</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(2,941</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Changes in operating assets and liabilities:</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
        receivable</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(1,236,672</font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3">)</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">829,850</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">427,100</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,008,437</font></td>
    <td noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid
        expenses and other current assets</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(125,539</font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(16,651</font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
        assets </font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">14,167</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">16,667</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4" height="16">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
        payable</font></div>
    </td>
    <td width="1%" height="16">&nbsp;</td>
    <td valign=bottom align=left height="16">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" height="16"><font size="3" face="Times New Roman, Times, serif">1,099,659</font></td>
    <td valign=bottom noWrap align=left width="1%" height="16">&nbsp;</td>
    <td width="1%" height="16">&nbsp;</td>
    <td valign=bottom align=left width="1%" height="16">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" height="16"><font size="3" face="Times New Roman, Times, serif">(783,203</font></td>
    <td valign=bottom noWrap align=left width="1%" height="16"><font size="3">)</font></td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued
        payroll and related expenses</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">143,213</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(23,755</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
        income on shipments to distributors</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left height="16">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" height="16"><font size="3" face="Times New Roman, Times, serif">(8,258</font></td>
    <td valign=bottom noWrap align=left width="1%" height="16"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    <td width="1%" height="16">&nbsp;</td>
    <td valign=bottom align=left width="1%" height="16">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" height="16"><font size="3" face="Times New Roman, Times, serif">(570,062</font></td>
    <td valign=bottom noWrap align=left width="1%" height="16"><font size="3">)</font></td>
  </tr>
  <tr bgcolor="#cceeff">
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
        service revenue</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">64,585</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000" ><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">131,857</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        Net cash provided by (used in) operating activities</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">(381,111</font></td>
    <td valign=bottom noWrap align=left width="1%" style="border-bottom: 1px solid #000000"><font size="3">)</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">181,899</font></td>
    <td valign=bottom noWrap align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td colspan="4"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left>&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div
    style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Investing
        activities</b></font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Purchases of equipment</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">(46,492</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">(88,039</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        &nbsp;&nbsp; Net cash used in investing activities</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">(46,492</font></td>
    <td noWrap align=left width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">(88,039</font></td>
    <td noWrap align=left width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif"><b><b>&nbsp</b></b></font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3"></font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="11%"><font size="3"></font></td>
    <td noWrap align=left width="1%"><font size="3"></font></td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div
    style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Financing
        activities</b></font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Payments on capital leases</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(3,009</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(2,961</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Proceeds from borrowings under bank line of credit agreement</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">1,803,623</font></td>
    <td width="1%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">3,533,034</font></td>
    <td width="1%"><font size="3"></font></td>
  </tr>
  <tr bgcolor="#cceeff">
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Repayments of borrowings under bank line of credit agreement</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(1,338,902</font></td>
    <td width="1%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(2,963,023</font></td>
    <td width="1%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 height="22">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Stock options exercised</font></div>
    </td>
    <td height="22" width="1%"><font size="3"></font></td>
    <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">8,120</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td height="22" width="1%"><font size="3"></font></td>
    <td valign=bottom align=left height="22" width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        Net cash provided by financing activities</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">469,832</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td align=left width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">567,050</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif"><b><b>&nbsp</b></b></font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3"></font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3"></font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font></td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">Net
        increase in cash and cash equivalents</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">42,229</font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">660,910</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      </font></td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left ><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" ><font size="3"></font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left ><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%" ><font size="3"></font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font></td>
  </tr>
  <tr bgcolor="#cceeff">
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">Cash
        and cash equivalents at beginning of period</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">1,940,295</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">757,342</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 height="12">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">Cash
        and cash equivalents at end of period</font></div>
    </td>
    <td height="12" width="1%"><font size="3"></font></td>
    <td valign=bottom align=left height="12" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right height="12" width="11%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">1,982,524</font></td>
    <td align=left height="12" style="border-bottom: 3px double #000000">&nbsp;</td>
    <td height="12" width="1%"><font size="3"></font></td>
    <td valign=bottom align=left height="12" width="1%" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="12" width="11%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">1,418,252</font></td>
    <td align=left height="12" style="border-bottom: 3px double #000000">&nbsp;</td>
  </tr>
  <tr bgcolor="#cceeff">
    <td valign=top align=left colspan=4 height="16">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3"></font></div>
    </td>
    <td height="16" width="1%"><font size="3"></font></td>
    <td valign=bottom align=left height="16"><font size="3"></font></td>
    <td valign=bottom noWrap align=right height="16" width="11%"><font size="3"></font></td>
    <td valign=bottom noWrap align=left height="16" width="1%"><font size="3"></font></td>
    <td height="16" width="1%"><font size="3"></font></td>
    <td valign=bottom align=left height="16" width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right height="16" width="11%"><font size="3"></font></td>
    <td valign=bottom noWrap align=left height="16" width="1%"><font size="3"></font></td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Supplemental
        cash flow information </b></font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Cash paid for interest</font></div>
    </td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">47,583</font></td>
    <td width="1%"><font size="3"></font></td>
    <td width="1%"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">65,265</font></td>
    <td width="1%"><font size="3"></font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif" size="3"><BR>
  </font> </p>
<P align=center><font face="Times New Roman, Times, serif" size="3">See accompanying
  notes. <BR>
  <BR>
  3 <BR>
  </font>
<P align=center>
<HR width="100%">
<P align=left>
<P align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a name=notes></a></font>
<P align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><font face="Times New Roman, Times, serif" size="3"><b><br>
  NOTE 1 - Basis of Presentation</b></font></p>
<p>The accompanying unaudited condensed financial statements of Socket Mobile,
  Inc. (the &quot;Company&quot;) have been prepared in accordance with accounting
  principles generally accepted in the United States for interim financial information
  and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly,
  they do not include all of the information and footnotes required by accounting
  principles generally accepted in the United States for complete financial statements.
  In the opinion of management, all adjustments, consisting only of normal recurring
  accruals considered necessary for fair presentation have been included. Certain
  information and footnote disclosures normally included in financial statements
  prepared in accordance with accounting principles generally accepted in the
  United States have been condensed or omitted. These condensed financial statements
  should be read in conjunction with the audited financial statements and notes
  included in the Company's Annual Report on Form 10-K for the year ended December
  31, 2009. The financial statements in the Company's annual report on Form 10-K
  were prepared on a going concern basis. The accompanying financial statements
  have been prepared assuming that the Company will continue as a going concern,
  which contemplates the realization of assets and the settlement of liabilities
  and commitments in the normal course of business. These financial statements
  do not include any adjustments to reflect the possible future effects on the
  recoverability and classification of assets or the amounts and classification
  of liabilities that may result from uncertainty related to the Company's ability
  to continue as a going concern.</p>
<p><i>Liquidity and Going Concern</i><br>
  The Company's cash balances at March 31, 2010 were $2.0 million, including cash
  of $1.5 million drawn against its bank lines of credit. The Company's cash balances
  at March 31, 2010, reflect a net increase of $0.5 million in amounts drawn on
  its bank lines of credit for the first quarter of 2010, partially offset by
  net cash used of $0.4 million in operating activities. On March 3, 2010, the
  Company agreed with its bank to extend the term of the existing credit facility
  to March 23, 2011, to amend the terms of the credit facility with a minimum
  cash deposit requirement of $1.0 million and minimum quarterly revenue requirements
  for fiscal 2010, to extend the period of forbearance related to the Company's
  fourth quarter 2009 covenant default, and to provide that the bank would waive
  that event of default if the Company met the requisite financial covenants for
  the first quarter of 2010. The Company failed to meet the minimum revenue covenant
  for the quarter ended March 31, 2010, however, on May 12, 2010 the bank agreed
  to waive the events of default and to replace the quarterly minimum revenue
  requirements with quarterly net income targets for the remaining quarters of
  fiscal 2010 (see &quot;Note 4 - Bank Financing Arrangements&quot; for more information).
  The Company's balance sheet at March 31, 2010 has a current ratio (current assets
  divided by current liabilities) of 0.9 to 1.0, and no material long term debt.
  The Company has taken actions to reduce expenses to align its cost structure
  with current economic conditions. The Company has the ability to reduce expenses
  further if necessary. If the Company can return to revenue growth and attain
  profitability, the Company anticipates requirements for cash will include funding
  of higher receivable and inventory balances, and increased expenses, including
  an increase of costs relating to new employees to support its growth and increases
  in salaries, benefits, and related support costs for existing employees. If
  the Company cannot attain profitability, the Company will not be able to support
  its operations from positive cash flows, and the Company will use its existing
  cash to support operating losses. The Company may also find it necessary to
  raise additional capital to fund its operations, however, there can be no assurance
  that additional capital will be available on acceptable terms, if at all, and
  any such terms may be dilutive to existing stockholders. If the Company is unable
  to secure the necessary capital for its business, the Company may need to suspend
  some or all of its current operations. </p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">4<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p>&nbsp; </p>
<p>The Company's continuing operating losses, declines in its working capital
  balances and the Company's failure to achieve the revenue levels required to
  maintain compliance with its bank line covenants are conditions that raise doubt
  about the Company's ability to continue as a going concern. The Company's ability
  to continue as a going concern is dependent upon its ability to establish profitable
  operations and to increase its capital. Management has been taking steps intended
  to reduce operating losses and achieve profitability including the introduction
  of new products, continued close support of the Company's distributors and its
  application partners as they establish their mobile applications in key vertical
  markets, and management of its costs. Management believes that it will be able
  to improve the Company's liquidity and secure additional sources of financing
  by managing its working capital balances, returning to compliance with the bank
  line covenants as operating results improve, and raising additional capital
  as needed including development funding from development partners and the issuance
  of additional equity securities. There can be no assurance that management will
  be successful in achieving these steps, and there can be no assurance that additional
  financing will be available on acceptable terms, if at all, and any such terms
  may be dilutive to existing stockholders. The Company's inability to secure
  and maintain the necessary liquidity would have a material adverse effect on
  the Company's financial condition and results of operations.</p>
<p><font face="Times New Roman, Times, serif"><b>NOTE 2 - Summary of Significant
  Accounting Policies</b></font></p>
<p><font face="Times New Roman, Times, serif"><i>Use of Estimates</i><br>
  The preparation of financial statements in conformity with accounting principles
  generally accepted in the United States requires management to make estimates
  and assumptions that affect the reported amounts of assets and liabilities,
  the disclosure of contingent assets and liabilities at the date of the financial
  statements, and the reported amounts of revenue and expense during the reporting
  period. Actual results could differ from those estimates, and such differences
  may be material to the financial statements.</font></p>
<p><font face="Times New Roman, Times, serif"><i>Recent Accounting Standards </i><br>
  In January 2009, the Securities and Exchange Commission (&quot;SEC&quot;) issued
  Release No. 33-9002, &quot;Interactive Data to Improve Financial Reporting.&quot;
  The final rule requires companies to provide their financial statements and
  financial statement schedules to the SEC and on their corporate websites in
  interactive data format using the eXtensible Business Reporting Language (&quot;XBRL&quot;).
  The rule was adopted by the SEC to improve the ability of financial statement
  users to access and analyze financial data. The SEC adopted a phase-in schedule
  indicating when registrants must furnish interactive data. Under this schedule,
  the Company will be required to submit filings with financial statement information
  using XBRL commencing with its June 30, 2011 quarterly report on Form 10-Q.
  The Company is currently evaluating the impact of XBRL reporting on its financial
  reporting process.</font></p>
<p><font face="Times New Roman, Times, serif"><br>
  </font></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">5<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p>&nbsp;</p>
<p>In October 2009, the FASB amended revenue recognition guidance for arrangements
  with multiple deliverables. The guidance eliminates the residual method of revenue
  recognition and allows the use of management's best estimate of selling price
  for individual elements of an arrangement when vendor specific objective evidence
  (&quot;VSOE&quot;), vendor objective evidence (&quot;VOE&quot;) or third-party
  evidence (&quot;TPE&quot;) is unavailable. This guidance should be applied on
  a prospective basis for revenue arrangements entered into or materially modified
  in fiscal years beginning on or after June 15, 2010, with early adoption permitted.
  Full retrospective application of the guidance is optional. The Company is currently
  evaluating the impact of adopting this guidance on its financial statements.</p>
<p>In October 2009, the FASB issued guidance which amends the scope of existing
  software revenue recognition accounting. Tangible products containing software
  components and non-software components that function together to deliver the
  product's essential functionality would be scoped out of the accounting guidance
  on software and accounted for based on other appropriate revenue recognition
  guidance. This guidance should be applied on a prospective basis for revenue
  arrangements entered into or materially modified in fiscal years beginning on
  or after June 15, 2010, with early adoption permitted. Full retrospective application
  of the new guidance is optional. This guidance must be adopted in the same period
  that the Company adopts the amended accounting for arrangements with multiple
  deliverables described in the preceding paragraph. The Company is currently
  evaluating the impact of adopting this guidance on its financial statements.</p>
<p>In January 2010, the FASB issued guidance which clarifies and provides additional
  disclosure requirements related to recurring and non-recurring fair value measurements.
  The Company implemented these new requirements in the first quarter of fiscal
  2010. Certain additional disclosures about purchases, sales, issuances and settlements
  in the roll forward of activity in Level 3 fair value measures are not effective
  until fiscal years beginning after December 15, 2010. Other than requiring additional
  disclosures, implementation of this new guidance will not have a material impact
  on the Company's financial statements.</p>
<p align=left><font face="Times New Roman, Times, serif"><i>Cash Equivalents and
  Fair Value of Financial instruments</i><br>
  The Company considers all highly liquid investments purchased with a maturity
  date of 90 days or less at date of purchase to be cash equivalents. At March
  31, 2010 and December 31, 2009, all of the Company's cash and cash equivalents
  consisted of amounts held in demand and money market deposits in banks. The
  carrying value of the Company's cash and cash equivalents, accounts receivable,
  accounts payable, debt and foreign exchange contracts approximate fair value
  due to the relatively short period of time to maturity. </font>
<p align=left><i>Derivative Financial Instruments</i><br>

<p align=left>The Company regularly enters into forward foreign currency contracts
  to reduce exposures related to rate changes in certain foreign currencies. The
  Company's forward foreign currency contracts are recorded at fair value and
  are included in other assets at March 31, 2010. At March 31, 2010, these derivative
  instruments were not designated as hedges, and accordingly, changes in the fair
  value of the forward foreign currency contracts were recorded in net income.
  At March 31, 2010, contracts with a notional amount of $300,000 to hedge Euros
  were recorded as an asset with a fair value of $2,127 based on quotations from
  financial institutions, and had maturity dates in April 2010. At December 31,
  2009, contracts with a notional amount of $721,500 to hedge Euros were recorded
  as an asset with a fair value of $5,175 based on quotations from financial institutions,
  and had maturity dates in January 2010.
<p align=left>&nbsp;
<p align=center><font face="Times New Roman, Times, serif" size="3">6<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p align=left>&nbsp;
<p align=left><i>Goodwill and Other Intangible Assets Review</i><br>
  <br>
<p align=left>Goodwill is tested for impairment annually or more frequently when
  events or circumstances indicate that the carrying value of the Company's single
  reporting unit more likely than not exceeds its fair value. Based on indicators
  in the fourth quarter of 2009 the Company performed additional goodwill impairment
  testing with the assistance of a third party valuation specialist. The Company
  used the two step test as required to assess goodwill for impairment. The first
  step of the goodwill impairment test consisted of comparing the carrying value
  of the reporting unit to its fair value. Management estimated the fair value
  of the Company using various methods and compared the fair value to the carrying
  amount (net book value) to ascertain if potential goodwill impairment existed.
  The Company utilized methods that focused on its ability to produce income (&quot;Income
  Approach&quot;) and the estimated consideration it would receive if there were
  a sale of the Company (&quot;Market Approach&quot;). Key assumptions utilized
  in the determination of fair value in step one of the test included the following:
  the Company's market capitalization; market multiples of comparable companies
  within its industry; revenue and expense forecasts used in the evaluation were
  based on trends of historical performance and management's estimate of future
  performance; cash flows utilized in the discounted cash flow analysis were estimated
  using a weighted average cost of capital determined to be appropriate for the
  Company.
<p align=left>Based on the fair value estimated in step one, the Company determined
  a step one failure occurred which indicated a goodwill impairment may exist.
  The Company performed a step two analyses which included estimating the fair
  value of its assets and liabilities, including previously unrecognized intangible
  assets. The Income Approach was utilized to value the Company's identified intangible
  assets, including developed technology, trade name, patents, and internally
  developed software. As a result of a preliminary step two test as of December
  31, 2009, the estimated fair value of the Company's goodwill was $4,427,000,
  which exceeded the carrying value by $5,370,946. As a result, the Company recorded
  an estimated $5,370,946 goodwill impairment as of December 31, 2009. In the
  quarter ended March 31, 2010, the Company finalized the identification and valuation
  of the intangible assets with the assistance of a third party specialist and
  there was no adjustment to the estimated impairment recorded at December 31,
  2009 based on the completion of the step two analyses.
<p align=left><font face="Times New Roman, Times, serif"><b>NOTE 3 - Inventories</b></font>
<p><font face="Times New Roman, Times, serif">Inventories consist principally
  of raw materials and sub-assemblies, which are stated at the lower of cost (first-in,
  first-out) or market.<br>
  <br>
  </font></p>
<table width="70%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr>
    <td align="left" valign="top" width="60%">
      <div style="margin-left: 10px; text-indent: -10px"></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td align="center" valign="bottom" colspan="2" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">March
      31,<br>
      2010</font></td>
    <td align="center" valign="bottom" nowrap width="1%">&nbsp;</td>
    <td width="1%" align="center">&nbsp;</td>
    <td align="center" valign="bottom" colspan="2" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">December
      31,<br>
      2009</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="60%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
        Raw materials and sub-assemblies</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,521,657</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,939,416</font></td>
  </tr>
  <tr>
    <td align="left" valign="top" width="60%">
      <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">Finished
        goods</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="left" valign="bottom" width="2%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="right" valign="bottom" nowrap width="11%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">95,362</font></td>
    <td align="left" valign="bottom" nowrap width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="right" valign="bottom" nowrap width="11%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">104,703</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="60%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"> </div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="11%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">1,617,019</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="11%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">2,044,119</font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  <br>
  </font></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">7<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><font face="Times New Roman, Times, serif"> </font></p>
<p align=left><font face="Times New Roman, Times, serif" size="3"><b>NOTE 4 -
  Bank Financing Arrangements</b></font>
<p>The Company has a credit facility with Silicon Valley Bank which allows the
  Company to borrow up to $2,500,000 based on the level of qualified domestic
  and international receivables, up to a maximum of $1,500,000 and $1,000,000,
  respectively. Borrowings under the lines bear an annual interest rate equal
  to the greater of (i) the Lender's prime rate plus 2%, or (ii) 6%. The annual
  interest rate in effect at March 31, 2010 and December 31, 2009 was 6%. The
  borrowings under the credit facility are secured by a first priority security
  interest in the assets of the Company. The advance rate for receivables is 50%
  from distributors and 70% for all other receivables. The agreement also specifies
  a collateral handling fee of 0.62% per month. The applicable interest and fees
  are calculated based on the full amount of the accounts receivable provided
  as collateral, rather than on the actual amounts borrowed. The outstanding amounts
  borrowed under the domestic and international lines at December 31, 2009 were
  $649,905 and $352,183, respectively, and the full amounts of accounts receivable
  provided as collateral were $1,124,770, and $678,794, respectively. The Company
  was out of compliance with the minimum revenue covenant for the quarter ended
  December 31, 2009. Silicon Valley Bank agreed to forbear any actions relating
  to the event of default through March 24, 2010.</p>
<p>On March 3, 2010, the Company agreed with Silicon Valley Bank to extend the
  term of the existing credit facility to March 23, 2011 and to amend its other
  terms. Under the terms of the amendment the Company is required to maintain
  at all times a minimum cash deposit balance at Silicon Valley Bank of no less
  than $1,000,000; and to achieve minimum quarterly revenue requirements for fiscal
  2010. The amendment also extended the period that Silicon Valley Bank agreed
  to forbear from enforcing its rights and remedies under the credit facility
  through April 30, 2010, and provided that Silicon Valley Bank would waive the
  existing event of default under the credit facility if the Company met the requisite
  financial covenants for the quarter ending March 31, 2010. The Company failed
  to meet the minimum revenue covenant for the quarter ended March 31, 2010, however,
  on May 12, 2010 the bank agreed to waive the events of default and to replace
  the quarterly minimum revenue requirements with quarterly net income targets
  for the remaining quarters of fiscal 2010. For the quarter ending June 30, 2010
  the Company's net loss is not to exceed $300,000; for the quarter ending September
  30, 2010 the net loss is not to exceed $200,000; and for the quarter ending
  December 31, 2010 the Company must achieve net income of at least $1.00. The
  outstanding amounts borrowed under the domestic and international lines at March
  31, 2010 were $1,096,913 and $369,896, respectively, and the full amounts of
  accounts receivable provided as collateral were $1,953,666, and $688,840, respectively.
  Should the Company fail to meet any of the financial covenants specified in
  the credit facility agreement, such failure would constitute an event of default
  under the terms of the credit agreement, and Silicon Valley Bank may, among
  its remedies, declare all obligations under the credit facility immediately
  due and payable and terminate its forbearance. </p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">8<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p align=left><font face="Times New Roman, Times, serif"><b>NOTE 5 - Intangible
  Assets</b> </font>
<p>Intangible assets consist of a patent purchased in 2004 for $600,000 covering
  the design and functioning of plug-in bar code scanners, bar code imagers, and
  radio frequency identification products, which is being amortized on a straight
  line basis over its estimated life of ten years. Intangible assets of $570,750
  remaining from a prior acquisition in 2000 consisting of developed software
  and technology with estimated lives at the time of acquisition of 8.5 years
  was fully amortized in the quarter ended June 30, 2009.</p>
<p align=left>Amortization of all intangible assets for the quarters ended March
  31, 2010 and 2009, was $15,000 and $31,787, respectively. Intangible assets
  as of March 31, 2010 consisted of the following:
<p align=left>&nbsp;
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="70%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="65%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="1%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=03 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=04 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=04 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=04 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left>&nbsp;</td>
    <td>&nbsp;</td>
    <td  valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Gross</font></div>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Accumulated</font></div>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=2>
      <div align="center"></div>
    </td>
    <td>&nbsp;</td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left>
      <div
     ></div>
    </td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Assets</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Amortization</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Net</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Patent</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right><font size="3" face="Times New Roman, Times, serif">600,000</font></td>
    <td valign=bottom noWrap align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right><font size="3" face="Times New Roman, Times, serif">345,000</font></td>
    <td valign=bottom noWrap align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td noWrap align=right><font size="3" face="Times New Roman, Times, serif">255,000</font></td>
    <td valign=bottom noWrap align=left>&nbsp; </td>
  </tr>
  <tr  valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Project
        management tools </font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">570,750</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">570,750</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">Total intangible
        assets</font></div>
    </td>
    <td bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,170,750</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">915,750</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">255,000</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
</table>
<font face="Times New Roman, Times, serif"><br>
</font>
<p><font face="Times New Roman, Times, serif">Based on definite lived intangible
  assets recorded at March 31, 2010, and assuming no subsequent impairment of
  the underlying assets, the annual amortization expense is expected to be as
  follows:<br>
  <br>
  </font></p>
<table style="MARGIN-TOP: 3pt; FONT-SIZE: 10pt" cellspacing=0 cellpadding=0
width="60%" align=center border=0>
  <tr>
    <td noWrap align=left width="71%" style="border-bottom: 1px solid #000000" ><font size="3" face="Times New Roman, Times, serif">
      Year</font></td>
    <td width="4%">&nbsp;</td>
    <td colspan="4" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Amount</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left bgcolor="#cceeff" width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">2010
        (nine months remaining)</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td bgcolor="#cceeff" width="3%" align="right"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td valign=bottom align=right bgcolor="#cceeff" colspan="2"><font size="3" face="Times New Roman, Times, serif">45,000</font></td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="10%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">2011</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=right colspan="2"><font size="3" face="Times New Roman, Times, serif">60,000</font></td>
    <td width="10%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left bgcolor="#cceeff" width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">2012</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td bgcolor="#cceeff" width="3%">&nbsp;</td>
    <td valign=bottom align=right bgcolor="#cceeff" colspan="2"><font size="3" face="Times New Roman, Times, serif">60,000</font></td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="10%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">2013</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=right colspan="2"><font size="3" face="Times New Roman, Times, serif">60,000</font></td>
    <td valign=bottom noWrap align=left width="10%">&nbsp;</td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">2014</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td width="3%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td valign=bottom align=right colspan="2" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">30,000</font></td>
    <td valign=bottom noWrap align=left width="10%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td width="3%" align="right" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td valign=bottom align=right colspan="2" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">255,000</font></td>
    <td valign=bottom noWrap align=left width="10%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  Intangible assets as of December 31, 2009 consisted of the following: </font><br>
  <br>
</p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="70%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="65%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="1%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=03 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=04 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=04 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=04 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left>&nbsp;</td>
    <td>&nbsp;</td>
    <td  valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Gross</font></div>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Accumulated</font></div>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=2>
      <div align="center"></div>
    </td>
    <td>&nbsp;</td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left>
      <div
     ></div>
    </td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Assets</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Amortization</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Net</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Patent</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right><font size="3" face="Times New Roman, Times, serif">600,000</font></td>
    <td valign=bottom noWrap align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right><font size="3" face="Times New Roman, Times, serif">330,000</font></td>
    <td valign=bottom noWrap align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td noWrap align=right><font size="3" face="Times New Roman, Times, serif">270,000</font></td>
    <td valign=bottom noWrap align=left>&nbsp; </td>
  </tr>
  <tr  valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Project
        management tools </font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">570,750</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">570,750</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">Total intangible
        assets</font></div>
    </td>
    <td bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,170,750</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">900,750</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">270,000</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
</table>
<p>&nbsp;</p>
<p><font face="Times New Roman, Times, serif"><b>NOTE 6 - Segment Information
  and Concentrations</b></font></p>
<p><font face="Times New Roman, Times, serif"> <i>Segment information</i><br>
  The Company operates in one segment-mobile systems solutions for businesses.
  Mobile systems solutions typically consist of a handheld computer, data collection
  and connectivity peripherals, and third-party vertical applications software.
  The Company markets its products in the United States and foreign countries
  through its sales personnel, distributors, and vertical industry partners. Revenues
  for the geographic areas for the three months ended March 31, 2010 and 2009
  were as follows:<br>
  <br>
  </font></p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">9<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><font face="Times New Roman, Times, serif"><br>
  <br>
  </font></p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="60%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="65%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="1%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=03 type=hang1 --> <!-- colindex=04 type=gutter --> <!-- colindex=04 type=lead -->
    <!-- colindex=04 type=body --> <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="13">&nbsp; </td>
    <td height="13">&nbsp; </td>
    <td valign=bottom noWrap align=middle colspan=7 height="13" >
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Three
        Months Ended March 31, </font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td noWrap align=left width="71%" style="border-bottom: 1px solid #000000" ><font size="3" face="Times New Roman, Times, serif">
      Revenues:</font></td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2010</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2009</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">United
        States</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right><font size="3" face="Times New Roman, Times, serif">2,802,929</font></td>
    <td valign=bottom noWrap align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right><font size="3" face="Times New Roman, Times, serif">2,753,346</font></td>
    <td valign=bottom noWrap align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Europe</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left>&nbsp; </td>
    <td valign=bottom noWrap align=right><font size="3" face="Times New Roman, Times, serif">825,170</font></td>
    <td valign=bottom noWrap align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left>&nbsp;</td>
    <td noWrap align=right><font size="3" face="Times New Roman, Times, serif">1,536,957</font></td>
    <td valign=bottom noWrap align=left>&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Asia
        and rest of world</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">179,050</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">481,587</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif"><font style="FONT-SIZE: 10pt" size="2">&nbsp;&nbsp;
        &nbsp;&nbsp; </font>Total Revenues</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">3,807,149</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">4,771,890</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  Export revenues are attributable to countries based on the location of the Company's
  customers. The Company does not hold long-lived assets in foreign locations.</font></p>
<p><font face="Times New Roman, Times, serif">Major customers who accounted for
  at least 10% of the Company's total revenues were as follows:<br>
  <br>
  </font></p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="60%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="51%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="9%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right width="11%">&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="6%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="4%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="9%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=03 type=body --> <!-- colindex=03 type=hang1 --> <!-- colindex=04 type=gutter -->
    <!-- colindex=04 type=lead --> <!-- colindex=04 type=body --> <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="16" colspan="2">&nbsp; </td>
    <td valign=bottom noWrap align=middle colspan=6 height="16" >
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Three
        Months Ended March 31, </font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left colspan="2">
      <div
     ></div>
    </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan="2">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2010</font></div>
    </td>
    <td width="1%">&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan="3">
      <div align="center"></div>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2009</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left colspan="2">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Ingram
        Micro Inc.</font></div>
    </td>
    <td noWrap align=right width="9%"><font size="3" face="Times New Roman, Times, serif">17</font></td>
    <td noWrap align=left width="8%"><font size="3" face="Times New Roman, Times, serif">%</font>
    </td>
    <td width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="9%"><font size="3" face="Times New Roman, Times, serif">23</font></td>
    <td valign=bottom noWrap align=left width="8%"><font size="3" face="Times New Roman, Times, serif">%</font>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left colspan="2">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Tech
        Data Corporation</font></div>
    </td>
    <td noWrap align=right width="9%"><font size="3" face="Times New Roman, Times, serif">12</font></td>
    <td noWrap align=left width="8%"><font size="3" face="Times New Roman, Times, serif">%</font></td>
    <td width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="9%"><font size="3" face="Times New Roman, Times, serif">17</font></td>
    <td valign=bottom noWrap align=left width="8%"><font size="3" face="Times New Roman, Times, serif">%</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left colspan="2" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">BlueStar</font></div>
    </td>
    <td noWrap align=right width="9%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">18</font></td>
    <td noWrap align=left width="8%" bgcolor="#cceeff">%</td>
    <td width="1%" bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="9%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">*</font></td>
    <td valign=bottom noWrap align=left width="8%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left colspan="8" height="26">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="2" face="Times New Roman, Times, serif">_____________________________________________<br>
        * Customer accounted for less than 10% of total revenues for the period</font></div>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p><i>Concentration of Credit Risk</i><br>
  Financial instruments that potentially subject the Company to significant concentrations
  of credit risk consist principally of cash, cash equivalents and accounts receivable.
  The Company invests its cash in demand and money market deposit accounts in
  banks. To the extent of the amounts recorded on the balance sheet, cash is concentrated
  at the Company's bank to the extent needed to comply with the minimum cash balance
  covenant of the bank line agreement. This exposure from an event of default
  by the bank is offset in part by amounts drawn against the bank line. To date,
  the Company has not experienced losses on these investments. The Company's trade
  accounts receivables are primarily with distributors and OEMs. The Company performs
  ongoing credit evaluations of its customers' financial conditions but the Company
  generally requires no collateral. Reserves are maintained for potential credit
  losses, and such losses have been within management's expectations. At March
  31, 2010 there were two customers with material amounts outstanding totaling
  45% of the Company's accounts receivable balances. At December 31, 2009, there
  were two customers with material amounts outstanding totaling 31% of the Company's
  accounts receivable balances. </p>
<p><i>Concentration of Suppliers</i><br>
  Several of the Company's component parts are produced by a sole or limited number
  of suppliers. Shortages could occur in these essential materials due to an interruption
  of supply or increased demand in the industry. If the Company were unable to
  procure certain of such materials, it would be required to reduce its operations,
  which could have a material adverse effect upon its results. At March 31, 2010
  and December 31, 2009, 53% and 33%, respectively, of the Company's accounts
  payable balances were concentrated in a single supplier. For the quarter ended
  March 31, 2010, two suppliers accounted for 69% of the inventory purchases.
</p>
<p><br>
</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">10<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><font face="Times New Roman, Times, serif"><b>NOTE 7 - Stock-Based Compensation</b></font></p>
<p>The Company recognizes stock-based compensation in the financial statements
  for all share-based awards to employees, including grants of employee stock
  options, based on their fair values. The Company uses a binomial lattice valuation
  model to estimate the fair value of stock option grants. The binomial lattice
  model incorporates calculations for expected volatility, risk-free interest
  rates, employee exercise patterns and post-vesting employment termination behavior,
  and these factors affect the estimate of the fair value of the Company's stock
  option grants. </p>
<p><font face="Times New Roman, Times, serif">Total stock-based compensation expense
  recognized in the Company's statements of operations for the three months ended
  March 31, 2010 and 2009 is shown below:<br>
  <br>
  </font></p>
<table width="60%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr>
    <td align="left" nowrap width="72%" height="21">&nbsp;</td>
    <td width="1%" height="21">&nbsp;</td>
    <td colspan="7" align="center" nowrap height="21" >
      <div align="center" class="border"><font size="3" face="Times New Roman, Times, serif">Three
        Months Ended March 31,</font></div>
    </td>
  </tr>
  <tr class="border">
    <td colspan="2" height="8"style="border-bottom: 1px solid #000000">
      <div style="margin-left: 10px; text-indent: -10px">
        <div align="left"><font size="3">Statements of Operations Classification</font></div>
      </div>
    </td>
    <td width="1%" class="border" height="13">&nbsp;</td>
    <td align="center" valign="bottom" colspan="3" class="border" style="border-bottom: 1px solid #000000" height="13"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
      2010</font></td>
    <td width="1%" class="border" height="13">&nbsp;</td>
    <td align="center" valign="bottom" colspan="3" class="border" height="13" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;2009</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="72%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">Cost of revenues</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="3%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">14,407</font></td>
    <td width="2%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">11,349</font></td>
    <td align="left" valign="bottom" nowrap width="2%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top" width="72%">
      <div style="margin-left: 10px; text-indent: -10px"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">Research and
        development</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td align="left" width="3%" valign="bottom" >&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="7%" ><font size="3" face="Times New Roman, Times, serif">39,826</font></td>
    <td align="left" valign="bottom" nowrap width="2%" >&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" >&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="7%" ><font size="3" face="Times New Roman, Times, serif">31,697</font></td>
    <td align="left" valign="bottom" nowrap width="2%" >&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="72%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">Sales and marketing</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="3%" bgcolor="#cceeff" >&nbsp;</td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">51,005</font></td>
    <td width="2%" bgcolor="#cceeff" >&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" >&nbsp;</td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">56,973</font></td>
    <td align="left" valign="bottom" nowrap width="2%" bgcolor="#cceeff" >&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top" width="72%">
      <div style="margin-left: 10px; text-indent: -10px"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">General and
        administrative</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td align="right" valign="bottom" nowrap width="7%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">60,002</font></td>
    <td align="right" valign="bottom" nowrap width="2%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td align="right" valign="bottom" nowrap width="7%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">52,501</font></td>
    <td align="right" valign="bottom" nowrap width="2%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="72%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">Total</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="3%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">165,240</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">152,520</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  The weighted average per share fair value of stock options granted during the
  three months ended March 31, 2010 and 2009 was estimated at $2.16 and $1.35,
  respectively. At March 31, 2010, options issued to employees for 1,220,151 shares
  were outstanding, of which options for 860,823 shares were exercisable. As of
  March 31, 2010, the total remaining unrecognized compensation costs related
  to unvested stock options was approximately $0.75 million, which will be amortized
  over the weighted average remaining requisite period of 2.1 years.</font></p>
<p><font face="Times New Roman, Times, serif">Weighted average assumptions for
  stock options granted during the three months ended March 31, 2010 and 2009
  are shown below:<br>
  <br>
  </font></p>
<table width="60%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr class="border">
    <td align="left" valign="top" width="70%" height="19">&nbsp;</td>
    <td width="1%" class="border" height="19">&nbsp;</td>
    <td colspan="7" align="center" nowrap height="21" >
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Three
        Months Ended March 31,</font></div>
    </td>
  </tr>
  <tr class="border">
    <td align="left" valign="top" width="70%" height="16">
      <div style="margin-left: 10px; text-indent: -10px">
        <div align="center" ></div>
      </div>
    </td>
    <td width="1%" class="border" height="16">&nbsp;</td>
    <td align="right" valign="bottom" nowrap colspan="2" height="16">
      <div align="center" style="border-bottom: 1px solid #000000" ><font size="3" face="Times New Roman, Times, serif">2010</font></div>
    </td>
    <td width="1%"class="border" height="16"><font face="Times New Roman, Times, serif" size="3">&nbsp
      </font></td>
    <td align="right" valign="bottom" nowrap colspan="2" height="16">
      <div align="center" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">2009</font></div>
    </td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="70%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Risk-free interest rate (%) </font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" nowrap width="9%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">3.61</font></td>
    <td width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="9%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">2.78</font></td>
    <td align="left" valign="bottom" nowrap width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%</font></td>
  </tr>
  <tr>
    <td align="left" valign="top" width="70%">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">Dividend
        yield</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="9%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="left" valign="bottom" nowrap width="5%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="9%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="left" valign="bottom" nowrap width="5%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="70%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Volatility factor</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" nowrap width="9%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1.11</font></td>
    <td width="5%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="9%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">0.93</font></td>
    <td align="left" valign="bottom" nowrap width="5%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top" width="70%">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">Expected
        option life (years)</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="9%"><font size="3" face="Times New Roman, Times, serif">4.2</font></td>
    <td align="left" valign="bottom" nowrap width="5%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="9%"><font size="3" face="Times New Roman, Times, serif">4.4</font></td>
    <td align="right" valign="bottom" nowrap width="5%">&nbsp;</td>
  </tr>
</table>
<font face="Times New Roman, Times, serif"><br>
</font>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">11<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><font face="Times New Roman, Times, serif"><b>NOTE 8 - Net Loss Per Share Applicable
  to Common Stockholders</b></font></p>
<p>The following table sets forth the computation of basic and diluted net loss
  per share:<font face="Times New Roman, Times, serif"><br>
  <br>
  </font></p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="60%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="13" width="59%">&nbsp; </td>
    <td height="13" width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=middle colspan=8 height="13">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Three
        Months Ended March 31, </font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="59%" height="16">
      <div
      ></div>
    </td>
    <td width="0%" height="16">&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="16">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2010</font></div>
    </td>
    <td width="1%" height="16">&nbsp;</td>
    <td width="2%" height="16">&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="16">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2009</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Numerator:</font></div>
    </td>
    <td width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="12%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp; </td>
  </tr>
  <tr  valign=bottom>
    <td valign=bottom noWrap align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">Net loss</font></div>
    </td>
    <td width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">$&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" width="11%"><font size="3" face="Times New Roman, Times, serif">(1,038,801</font></td>
    <td valign=bottom noWrap align=left width="2style="border-bottom: 3px double #000000"%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    <td width="1%">&nbsp;</td>
    <td width="2%">&nbsp; </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">$&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="11%"><font size="3" face="Times New Roman, Times, serif">(711,715</font></td>
    <td noWrap align=left width="2style="border-bottom: 3px double #000000"%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)</font></td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left bgcolor="#cceeff" width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td bgcolor="#cceeff" width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=right bgcolor="#cceeff" width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%">&nbsp;</td>
    <td noWrap align=right bgcolor="#cceeff" width="11%">&nbsp;</td>
    <td noWrap align=left bgcolor="#cceeff" width="2%">&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Denominator:</font></div>
    </td>
    <td width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=right width="11%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">Weighted average
        common shares outstanding used in computing net loss per share:</font></div>
    </td>
    <td bgcolor="#cceeff" width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=right bgcolor="#cceeff" width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%">&nbsp;</td>
    <td noWrap align=right bgcolor="#cceeff" width="11%">&nbsp;</td>
    <td noWrap align=left bgcolor="#cceeff" width="2%">&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        &nbsp;&nbsp; </font><font size="3" face="Times New Roman, Times, serif">Basic</font></div>
    </td>
    <td width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">3,788,995</font></td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
    <td width="1%">&nbsp;</td>
    <td width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
    <td noWrap align=right width="11%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">3,229,916</font></td>
    <td noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
  </tr>
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td noWrap align=left bgcolor="#cceeff" width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        &nbsp;&nbsp; </font><font size="3" face="Times New Roman, Times, serif">Diluted</font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">
        </font></div>
    </td>
    <td bgcolor="#cceeff" width="0%">&nbsp; </td>
    <td style="border-bottom: 3px double #000000" bgcolor="#cceeff" width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td style="border-bottom: 3px double #000000" align="right" bgcolor="#cceeff" width="11%"><font size="3" face="Times New Roman, Times, serif">3,788,995</font></td>
    <td align="left" valign="bottom" bgcolor="#cceeff" style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td bgcolor="#cceeff" width="1%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td style="border-bottom: 3px double #000000" bgcolor="#cceeff" width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td style="border-bottom: 3px double #000000" align="right" bgcolor="#cceeff" width="11%"><font size="3" face="Times New Roman, Times, serif">3,229,916</font></td>
    <td align="left" bgcolor="#cceeff" style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left bgcolor="#FFFFFF" width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font face="Times New Roman, Times, serif"><font size="3"><font size="3">Net
        loss per share:</font></font></font></div>
    </td>
    <td bgcolor="#FFFFFF" width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left bgcolor="#FFFFFF" width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right bgcolor="#FFFFFF" width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left bgcolor="#FFFFFF" width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td bgcolor="#FFFFFF" width="1%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td bgcolor="#FFFFFF" width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left bgcolor="#FFFFFF" width="2%">&nbsp;</td>
    <td noWrap align=right bgcolor="#FFFFFF" width="11%">&nbsp;</td>
    <td noWrap align=left bgcolor="#FFFFFF" width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        &nbsp;&nbsp; </font><font size="3" face="Times New Roman, Times, serif">Basic</font></div>
    </td>
    <td width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" width="11%"><font size="3" face="Times New Roman, Times, serif">(0.27</font></td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)
      </font></td>
    <td valign="bottom" width="1%">&nbsp;</td>
    <td valign="bottom" width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="11%"><font size="3" face="Times New Roman, Times, serif">(0.22</font></td>
    <td noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)
      </font></td>
  </tr>
  <tr valign=bottom>
    <td noWrap align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        &nbsp;&nbsp; </font><font size="3" face="Times New Roman, Times, serif">Diluted</font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">
        </font></div>
    </td>
    <td width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" width="11%"><font size="3" face="Times New Roman, Times, serif">(0.27</font></td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)
      </font></td>
    <td width="1%">&nbsp;</td>
    <td width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="11%"><font size="3" face="Times New Roman, Times, serif">(0.22</font></td>
    <td noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)
      </font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  For the quarters ended March 31, 2010 and 2009, the diluted net loss per share
  is equal to the basic net loss per share because the Company experienced losses
  in these periods. Thus no potential common shares underlying stock options and
  warrants have been included in the net loss per share calculation, as their
  effect is anti-dilutive. Options and warrants to purchase 1,271,969 shares of
  common stock at March 31, 2010, and options to purchase 1,175,945 shares of
  common stock at March 31, 2009, have been omitted from the net loss per share
  calculation.</font></p>
<p><br>
  <font face="Times New Roman, Times, serif"><b>NOTE 9 - Taxes</b></font></p>
<p>Deferred tax expense in the first quarter of 2009 was related entirely to the
  deferred tax liability on the portion of the Company's goodwill amortized for
  tax purposes. Due to the indefinite characteristic of this deferred tax liability,
  it could not be offset against deferred tax assets, and therefore resulted in
  a deferred tax expense of $8,000 in the first quarter of 2009. Goodwill impairment
  charges recorded as of December 31, 2009 on that portion of our goodwill being
  amortized for tax purposes, resulted in the reversal of accumulated deferred
  tax expense and the related deferred tax liability, temporarily eliminating
  the difference between financial and tax reporting. As a result no deferred
  tax expense was incurred in the first quarter of 2010.</p>
<p>At December 31, 2009, the Company has an unrecognized tax benefit of approximately
  $599,000, which did not change significantly during the three months ended March
  31, 2010. The unrecognized tax benefit is fully offset by the application of
  a valuation allowance. Future changes in the unrecognized tax benefit will have
  no impact on the effective tax rate due to the existence of the valuation allowance.
  It is the Company's policy to include interest and penalties related to tax
  positions as a component of income tax expense. No interest was accrued for
  the three months ended March 31, 2010.</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">12<br>
  </font> </p>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=mda></a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p>&nbsp;</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Item 2. Management's
  Discussion and Analysis of Financial Condition and Results of Operations </b></font></p>
<p><font face="Times New Roman, Times, serif" size="3"><i>This Quarterly Report
  contains forward-looking statements within the meaning of Section 27A of the
  Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
  Act of 1934, as amended. These statements include statements forecasting our
  future financial condition and results, our future operating activities, market
  acceptance of our products, expectations for general market growth of handheld
  computers and other mobile computing devices, growth in demand for our products,
  expansion of the markets that we serve, expansion of the distribution channels
  for our products, adoption of our embedded products by third-party manufacturers
  of electronic devices, and the timing of the introduction and availability of
  new products, as well as other forecasts discussed under &quot;Management's
  Discussion and Analysis of Financial Condition and Results of Operations.&quot;
  Words such as &quot;may,&quot; &quot;will,&quot; &quot;predicts,&quot; &quot;anticipates,&quot;
  &quot;expects,&quot; &quot;intends,&quot; &quot;plans,&quot; &quot;believes,&quot;
  &quot;seeks,&quot; &quot;estimates,&quot; variations of such words, and similar
  expressions are intended to identify such forward-looking statements. Such forward-looking
  statements are based on current expectations, estimates, and projections about
  our industry, management's beliefs, and assumptions made by management. These
  forward-looking statements are not guarantees of future performance and are
  subject to certain risks, uncertainties, and assumptions that are difficult
  to predict; therefore, actual results and outcomes may differ materially from
  what is expressed or forecasted in any such forward looking statements. Factors
  that could cause actual results and outcomes to differ materially include, but
  are not limited to: continued weakness in the U.S. and world economy generally
  and in the markets we serve in particular; the risk of delays in the availability
  of our products due to technological, market or financial factors including
  the availability of necessary working capital; our ability to successfully develop,
  introduce and market future products; our ability to effectively manage and
  contain our operating costs; the availability of announced third-party handheld
  computer hardware and software that our products are intended to work with;
  product delays associated with new model introductions and product changeovers
  by the makers of products that our products are intended to work with; continued
  growth in demand for handheld computers; market acceptance of emerging standards
  such as Bluetooth and wireless LAN and of our related connection, data collection
  and mobile handheld computer products; the ability of our strategic relationships
  to benefit our business as expected; our ability to enter into additional distribution
  relationships; or other factors described in this Form 10-Q including &quot;Part
  II, Item 1A. Risk Factors&quot; and recent Form 8-K and Form 10-K reports filed
  with the Securities and Exchange Commission. We assume no obligation to update
  such forward-looking statements or to update the reasons why actual results
  could differ materially from those anticipated in such forward-looking statements.</i></font></p>
<p><font face="Times New Roman, Times, serif" size="3"><i>You should read the
  following discussion in conjunction with the interim condensed financial statements
  and notes included elsewhere in this report, the Company's annual financial
  statements in the Form 10-K, and other information contained in other reports
  and documents filed from time to time with the Securities and Exchange Commission.</i></font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Revenues<br>
  </b></font><font face="Times New Roman, Times, serif"><br>
  We are a producer of mobile computing hardware systems serving business mobility
  markets. We offer a family of handheld computer products and a wide range of
  data collection products. We also offer embedded Bluetooth and wireless LAN
  products. Our data collection peripheral products also work with many third-party
  mobile handheld devices including smartphones, handheld computers, tablet computers,
  ultra-mobile personal computers (UMPCs), and notebooks, adding data collection
  and connectivity capabilities to these devices. Our products are designed to
  run or enhance mobile applications that enable the accessing, collection and
  processing of data by employees while mobile. Our mobile computing products
  utilize popular Bluetooth and wireless LAN connection technologies. Our plug-in
  and cordless data collection products offer a variety of data collection technologies
  including laser scanning, two dimensional (2D) and linear (1D) barcode scanning,
  plus we offer RFID (radio frequency identification) and magnetic stripe readers.
  <br>
  <br>
  <br>
  </font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">13<br>
  </font> </p>
<p align=center>
<hr width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font></p>
<p>More than 200 software integration companies are offering or developing vertical
  software applications for use with our handheld computers and data collection
  products. Healthcare and hospitality are two of the primary areas of focus for
  our software integration partners and more than half of our handheld computer
  sales now come from organizations within the healthcare and hospitality industries.
  Other vertical markets benefiting from our mobile solutions include retail merchandising,
  automotive, government and education. These mobile solutions are designed to
  improve the productivity of business enterprises and service providers by automating
  manual tasks, improving the quality of information collected, and enhancing
  mobile productivity by processing and transferring information from remote locations
  and mobile devices to the business or medical enterprise, and then if required,
  back to the remote locations and mobile devices.</p>
<p>We believe growth in the mobile workforce along with technical advances and
  cost reductions in mobile devices and networking technologies and the pervasive
  use of the Internet are driving broader adoption of mobile computing. Our products
  are designed to address the growing need for mobile computing by today's mobile
  workforce by enabling them to run or enhance mobile applications that allow
  access to business data files, or collect and process data while mobile, thereby
  enhancing their productivity and allowing them to exploit time sensitive opportunities
  and improve customer satisfaction. Overall, our hardware products enable mobile
  third-party applications to become complete mobile data collection and connectivity
  solutions.</p>
<p>We also make available to original equipment manufacturers (&quot;OEMs&quot;)
  our component Bluetooth and wireless LAN technologies. We develop these components
  for our own products and leverage that investment through the sale of modules
  and plug-in cards to OEM manufacturers to embed into their products, including
  driver and device management software that is designed to simplify the ability
  of mobile employees to get and stay connected with Wi-Fi as well as with Bluetooth.
</p>
<p>Our handheld computers and peripheral products are sold through a worldwide
  network of distributors and resellers, vertical industry partners, and value
  added resellers (VARs). Our OEM products are sold directly to the original equipment
  manufacturers. The geographic regions we serve include the Americas, Europe,
  the Middle East, Africa and Asia Pacific. Total revenues for the first quarter
  of 2010 were $3.8 million, a decrease of 20% from revenues of $4.8 million in
  the first quarter of 2009. </p>
<p>Our revenues in the comparable three month periods are classified into three
  broad product families:</p>
<ul>
  <li><font face="Times New Roman, Times, serif">Mobile handheld computer products;</font></li>
  <li><font face="Times New Roman, Times, serif">Mobile peripheral products for
    data collection and connectivity; and</font></li>
  <li><font face="Times New Roman, Times, serif">OEM embedded products. </font></li>
</ul>
<p>&nbsp; </p>
<p align=center><font face="Times New Roman, Times, serif" size="3">14<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><font face="Times New Roman, Times, serif">Our <b><i>mobile handheld computer
  products</i></b> are designed to be durable, lightweight and dependable devices
  which meet the requirements of the healthcare and hospitality markets we serve.
  Our initial model, the SoMo&reg; 650 (SoMo is derived from Socket Mobile), was
  introduced in June 2007 with initial volume shipments in September 2007, and
  features the Microsoft Windows Mobile Classic operating system, Versions 5.0
  and 6. Windows Mobile is the industry standard OS for mobile applications thereby
  ensuring that the SoMo is compatible with a large number of business applications
  and giving workers a familiar computing environment. Our mobile handheld computers
  are easy to customize for a particular application with peripherals and accessories.
  The SoMo products have an expected product life cycle of three to five years
  which meets the needs of our customers who are deploying mobile solutions. In
  order to extend the life of the current product family, we expect to upgrade
  components used in our SoMo products from time to time in response to decisions
  by component manufacturers to improve or replace their components. The SoMo's
  features include wireless LAN and Bluetooth, a fast processor, a large, bright
  screen display enabling its use outdoors, large amounts of SDRAM and flash memory,
  an extended battery, programmable action buttons to activate peripheral devices,
  reinforced CompactFlash and SDIO card slots, and a durable case. The SoMo is
  available with multiple language support. The SoMo 650 was specifically designed
  without an integrated mobile phone to serve the market for business mobility
  applications that are not mobile phone centric such as medication dispensing
  in the healthcare market or serving tables in the hospitality market, many of
  which use Bluetooth or wireless LAN connections for data communications. In
  late 2008, we introduced the SoMo 650 Rx model made with antimicrobial materials
  added to the case plastics to provide an extra layer of protection to the device
  to aid against the multiplication and spread of potentially harmful bacteria
  and microbes found in healthcare environments. We also introduced a SoMo 650
  Dx model without Bluetooth or wireless LAN for high security environments. We
  have also developed accessory products such as our backpack to enable direct
  connections to mobile phone networks using network phone cards and a durable
  case to provide additional protection in the event the computer is dropped.
  In addition, we work with third-party accessory providers, who have qualified
  to make a number of accessory products that work with the SoMo family of products,
  including headsets, battery chargers, keyboards, mobile printers, and smartcard
  readers. Mobile handheld computer products, accessories and related service
  revenues represented approximately 42% of our revenue for the three months ended
  March 31, 2010, compared to 32% of our revenues in the same period one year
  ago.</font></p>
<p><font face="Times New Roman, Times, serif">Our <i><b>mobile peripheral products</b></i>
  consist of data collection products and the related service revenues, connectivity
  products, and through September 30, 2009, serial interface products, which together
  represented approximately 44% of our revenue for the three months ended March
  31, 2010, compared to 49% of our revenues in the same period one year ago.</font></p>
<p><font face="Times New Roman, Times, serif">Our <i>data collection products</i>
  enable the electronic collection of data from barcodes, radio frequency identification
  (RFID) tags, or magnetic stripes and consist of: </font></p>
<ul>
  <li><font face="Times New Roman, Times, serif"> barcode scanning products that
    plug into or connect wirelessly to handheld computers, tablet computers, ultra-mobile
    personal computers, notebook computers and smartphones that use Windows Mobile,
    Windows CE, Windows 7/Vista/XP/Embedded, RIM Blackberry, or Nokia Symbian
    for E Series operating systems, and turn these devices into portable barcode
    scanners and RFID readers that can be used in various retail and industrial
    workplaces; our cordless hand scanner and cordless ring scanner may also be
    connected wirelessly to a desktop computer, enabling mobile barcode scanning
    around a fixed workstation;</font></li>
</ul>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  </font></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">15<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=mda></a></font>
<ul>
  <li><font face="Times New Roman, Times, serif">RFID plug-in products that read
    radio frequency identification tags; </font></li>
  <li><font face="Times New Roman, Times, serif">a combination plug-in barcode
    scanner and RFID reader; and </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">a plug-in magnetic stripe
    reader.<br>
    </font></li>
</ul>
<p>Our plug-in and Bluetooth cordless data collection products offer a variety
  of data collection price/performance levels. Our plug-in barcode scanners are
  available in both CompactFlash and SDIO form factors and we offer standalone
  cordless hand scanners that use Bluetooth as the connection interface. We also
  offer a ring scanner worn on the index finger which connects via Bluetooth to
  computing systems. During 2009 we realigned our data collection barcode scanning
  products to introduce an entry level laser barcode scanner, upgraded the durability
  of our ring scanner, and introduced both a CompactFlash and a Bluetooth cordless
  2D barcode scanner. 2D scanning enables larger amounts of data to be scanned
  compared to linear 1D barcodes, and the use of 2D scanning is becoming more
  widespread.</p>
<p>We have developed extensive barcode scanning and RFID reading software called
  SocketScan that supports our data collection products, and offer software developer
  kits that assist third-party developers in integrating our SocketScan software
  and our hardware products into their applications and solutions.</p>
<p><font face="Times New Roman, Times, serif">Our <i>connectivity products</i>
  are connection devices that can be plugged into standard CompactFlash or Secure
  Digital SDIO expansion slots in handheld computers, tablet computers, ultra
  mobile personal computers, and notebook computers that use Windows Mobile, Windows
  XP/Vista, or Windows Tablet operating systems. These products allow users to
  connect their devices over a cable via Ethernet or telephone to communicate
  with other networks and devices such as desktop computers, other handheld computers,
  tablet computers, ultra-mobile personal computers, and notebook computers, smartphones
  and printers. Our connectivity products include: </font></p>
<ul>
  <li>a modem for telephone connections that connects over a cable; and</li>
  <li>an Ethernet card for local area network connections that connects over a
    cable.<font face="Times New Roman, Times, serif"><br>
    </font></li>
</ul>
<p align="left">Most users of mobile computing devices now connect to networks
  wirelessly, and we expect to phase out our connectivity products during 2010.</p>
<p align="left"><font face="Times New Roman, Times, serif">Our <i>serial interface
  products</i> enabled the connection of a mobile computer to electronic devices
  either by way of a plug-in card (one, two or four ports) connecting over cables,
  or wirelessly over a Bluetooth network. These products were legacy products
  first introduced in 1993, and we were selling them over the past several years
  under a SocketSerial brand name and logo. Serial technology has gradually been
  replaced by alternative technologies such as USB (Universal Serial Bus) and
  serial product revenue in 2009 had become less than 5 percent of our total quarterly
  revenues. On September 30, 2009, we sold our serial product technology and business
  to Quatech, Inc., who continues to offer the line under the SocketSerial brand,
  and we discontinued distributing the product line in our distribution channels.
  As a result of this sale there are no revenues related to these products beyond
  fiscal 2009.</font></p>
<p align="left">&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">16<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align="left"><font face="Times New Roman, Times, serif">Our <i><b>OEM embedded
  products</b></i> consist of Bluetooth and wireless LAN modules and plug-in cards
  used primarily by Original Equipment Manufacturers (OEMs) of industrial grade
  handheld computers and other devices to build wireless connection functions
  into their products using the Bluetooth and wireless LAN standards for wireless
  connectivity. Our plug-in cards and modules using the Bluetooth standard for
  short-range wireless connectivity include extensive communications software
  enabling the use of these products. Our Bluetooth products use the Bluetooth
  2.1 + EDR standard, reflecting our continued commitment to keep our Bluetooth
  products current with evolving Bluetooth technology standards. Our plug-in cards
  for connecting wirelessly to local area networks have been upgraded to use the
  wireless LAN 802.11 a/b/g Wi-Fi standard, an upgrade from the previous wireless
  LAN 802.11b/g standard. Our wireless LAN products include extensive communications
  software with Cisco Compatible Extensions (CCX) designed to make these products
  easy to use. Our OEM product sales are primarily based on the acceptance of
  our designs by OEM customers (referred to as design-wins), and the above transitions
  in our product offerings have resulted in last-time buys by existing customers
  and reductions in ongoing revenue as we pursue new OEM customers for new design-wins.
  OEM embedded products represented approximately 14% of our revenues for the
  three months ended March 31, 2010, compared to 19% of our revenues for the same
  period one year ago.<br>
  </font></p>
<p>Our <i><b>SocketCare services</b></i> provide extended warranty and accidental
  breakage coverage for selected products including our handheld computers and
  our ring and cordless hand scanners. Premium service purchased at the time of
  product purchase provides coverage for three years. Service revenues were $0.2
  million or approximately 5 percent of our revenue for first quarter 2010. Service
  revenues were insignificant for the same quarter a year ago. Service revenues
  are included within the related handheld computer and data collection revenues
  in the table that follows.<br>
  <br>
  Our revenues by product family for the three months ended March 31, 2010 and
  2009, and the corresponding increase or decrease in revenues for the comparable
  periods are shown in the following table: </p>
<p align=left><font face="Times New Roman, Times, serif"><br>
  </font>
<table style="MARGIN-TOP: 6pt; FONT-SIZE: 10pt" cellspacing=0 cellpadding=0
width="70%" align=center border=0>
  <tr class="border">
    <td colspan=2 height="20" valign="bottom"  ><font size="3" face="Times New Roman, Times, serif"><i>(revenues
      in thousands)</i></font></td>
    <td height="20" valign="bottom" width="3%"  >&nbsp;</td>
    <td noWrap align=middle colspan=11 height="20">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Three
        months ended March 31,</font></div>
    </td>
    <td align=right style="border-bottom: 1px solid #000000" width="1%%" valign="bottom">
      <div align="left"></div>
    </td>
    <td noWrap align=middle colspan=2 height="20" >
      <div align="center"><font face="Times New Roman, Times, serif" size="3">Increase</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" height="8"style="border-bottom: 1px solid #000000">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">Product
        family: </font></div>
    </td>
    <td height="8" width="3%">&nbsp;</td>
    <td align="center" colspan="5" style="border-bottom: 1px solid #000000" height="8"><font face="Times New Roman, Times, serif" size="3">2010</font></td>
    <td align=left width="1%">&nbsp;</td>
    <td align=right style="border-bottom: 1px solid #000000" colspan="5">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2009</font></div>
    </td>
    <td align=right style="border-bottom: 1px solid #000000" width="1%%">
      <div align="left"></div>
    </td>
    <td align="center" style="border-bottom: 1px solid #000000" height="8" colspan="2"><font face="Times New Roman, Times, serif" size="3">(Decrease)</font></td>
  </tr>
  <tr>
    <td colspan="2" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Mobile handheld computer products</font></div>
    </td>
    <td width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,613</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
    <td width="3%" valign="bottom" bgcolor="#cceeff">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">42</font></div>
    </td>
    <td width="2%" valign="bottom" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%</font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,541</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
    <td width="3%" valign="bottom" bgcolor="#cceeff">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">32</font></div>
    </td>
    <td width="2%" valign="bottom" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%</font></td>
    <td valign=bottom align=left width="1%%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">5</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Mobile peripheral products:</font></div>
    </td>
    <td width="3%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=right style="border-bottom: 1px solid #000000" width="3%">
      <div align="right"></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="3%">
      <div align="right"></div>
    </td>
    <td valign=bottom align=right style="border-bottom: 1px solid #000000" width="2%">
      <div align="left"></div>
    </td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=right style="border-bottom: 1px solid #000000" width="3%">
      <div align="right"></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td align=right style="border-bottom: 1px solid #000000" width="3%">
      <div align="right"></div>
    </td>
    <td align=right style="border-bottom: 1px solid #000000" width="2%">
      <div align="left"></div>
    </td>
    <td align=left width="1%%">&nbsp;</td>
    <td align=right style="border-bottom: 1px solid #000000" width="3%">
      <div align="right"></div>
    </td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        &nbsp;&nbsp; Data collection</font></div>
    </td>
    <td width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,513</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
    <td width="3%" valign="bottom" bgcolor="#cceeff">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">40</font></div>
    </td>
    <td width="2%" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">%</font></div>
    </td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,714</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
    <td width="3%" valign="bottom" bgcolor="#cceeff">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">36</font></div>
    </td>
    <td width="2%" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">%</font></div>
    </td>
    <td valign=bottom align=left width="1%%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(12</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        &nbsp;&nbsp; Connectivity</font></div>
    </td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%"><font size="3" face="Times New Roman, Times, serif">152</font></td>
    <td width="1%" valign="bottom">&nbsp;</td>
    <td width="3%" valign="bottom">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">4</font></div>
    </td>
    <td width="2%" valign="bottom">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">%</font></div>
    </td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="5%"><font size="3" face="Times New Roman, Times, serif">236</font></td>
    <td width="1%">&nbsp;</td>
    <td width="3%">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">5</font></div>
    </td>
    <td width="2%">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">%</font></div>
    </td>
    <td valign=bottom align=left width="1%%">&nbsp;</td>
    <td noWrap align=right width="5%"><font size="3" face="Times New Roman, Times, serif">(36</font></td>
    <td width="1%" valign="bottom"><font size="3" face="Times New Roman, Times, serif">%)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" height="10" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        &nbsp;&nbsp; Serial interface products</font></div>
    </td>
    <td height="10" width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" height="10" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" height="10" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td width="1%" valign="bottom" height="10" bgcolor="#cceeff">&nbsp;</td>
    <td width="3%" valign="bottom" height="10" bgcolor="#cceeff">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">---</font></div>
    </td>
    <td width="2%" valign="bottom" height="10" bgcolor="#cceeff">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">%</font></div>
    </td>
    <td valign=bottom align=left width="1%" height="10" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" height="10" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="5%" height="10" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">362</font></td>
    <td width="1%" height="10" bgcolor="#cceeff">&nbsp;</td>
    <td width="3%" height="10" bgcolor="#cceeff">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">8</font></div>
    </td>
    <td width="2%" height="10" bgcolor="#cceeff">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">%</font></div>
    </td>
    <td valign=bottom align=left width="1%%" height="10" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="5%" height="10" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(100</font></td>
    <td width="1%" valign="bottom" height="10" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%)</font></td>
  </tr>
  <tr>
    <td colspan="2">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        OEM embedded products</font></div>
    </td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">529</font></td>
    <td width="1%" valign="bottom">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">14</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">%&nbsp</font></div>
    </td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">919</font></td>
    <td width="1%" valign="bottom">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">19</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">%&nbsp</font></div>
    </td>
    <td valign=bottom align=left width="1%%">&nbsp;</td>
    <td noWrap align=right width="5%" valign="bottom"><font size="3" face="Times New Roman, Times, serif">(42</font></td>
    <td width="1%" valign="bottom"><font size="3" face="Times New Roman, Times, serif">%)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        &nbsp;&nbsp; Total</font></div>
    </td>
    <td width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td valign=bottom align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">3,807</font></td>
    <td width="1%" height="10" bgcolor="#cceeff">&nbsp;</td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">100</font></td>
    <td width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">%</font></td>
    <td align=left width="1%" height="14" bgcolor="#cceeff">&nbsp;</td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">4,772</font></td>
    <td width="1%" height="10" bgcolor="#cceeff">&nbsp;</td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">100</font></td>
    <td width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">%</font></td>
    <td align=left width="1%%" height="14" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(20</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%)</font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  Our mobile handheld computer product and related service revenues in the first
  quarter of 2010 were $1.6 million, an increase of 5% compared to revenues of
  $1.5 million in the first quarter of 2009. The increase in the 2010 period was
  due to an increase in mobile handheld service revenues due to an increased percentage
  of customers opting to include our SocketCare extended warranty and accidental
  breakage coverage in conjunction with their deployments. Partially offsetting
  this increase was an overall decline in sales volume of our mobile handheld
  computer of 4%.</font></p>
<p>Our data collection product revenues in the first quarter of 2010 were $1.5
  million, a decrease of 12%, or $0.2 million, compared to revenues of $1.7 million
  in the first quarter of 2009. A revenue decrease of $0.3 million was due to
  reduced sales of our SDIO In-Hand Scan card and reduced sales of our primary
  scanning product, the CompactFlash In-Hand Scan card. Partially offsetting this
  decline was an increase in sales of our Cordless Ring Scanner. Revenues from
  our Cordless Hand Scanner were flat in the comparable periods. Our data collection
  product revenues continue to be affected by the worldwide economic slowdown
  as customers defer their deployment decisions.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">17<br>
  </font>
<p align=center>
<hr width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
</p>
<p>Our connectivity product revenues in the first quarter of 2010 were $152,000,
  a decline of 36% compared to revenues of $236,000 in the first quarter of 2009.
  The decline resulted from reduced sales volumes of our modem plug-in products
  and Ethernet plug-in products due to reduced corporate deployments of these
  wired connection solutions.</p>
<p align=left>As a result of the sale of our serial product technology and business
  on September 30, 2009, there are no revenues from serial interface products
  recognized beyond fiscal 2009. Our serial interface product revenues in the
  first quarter of 2009 were $0.4 million. The majority of our serial product
  sales in the first quarter of 2009 were from our standard serial PC card products
  which were primarily sold to connect peripheral devices or other electronic
  equipment to notebook computers. Remaining serial revenues in the first quarter
  of 2009 were from sales of our CompactFlash card product and cordless Bluetooth
  serial adapter.
<p>Our OEM embedded product revenues in the first quarter of 2010 were $0.5 million,
  a decrease of 42% compared to $0.9 million in the first quarter of 2009. Revenue
  decreases of $0.3 million were from reduced sales of our Bluetooth modules to
  our OEM customers as a result of phasing out older Bluetooth technology and
  a last-buy purchase program in 2008 through 2009. The majority of these last-buy
  shipments were concluded by the end of the first quarter of 2009. Additional
  declines in the first quarter 2010 were from reductions in sales of our wireless
  LAN plug-in cards.</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Gross Margins<br>
  </b></font>Our gross margins for the first quarter of 2010 were 42% compared
  to 47% in the comparable period one year ago. We generally price our products
  as a markup from our cost, and we offer discount pricing for higher volume purchases.
  Reductions in overall margins in the first quarter of 2010 are due primarily
  to a greater portion of our revenues comprised of mobile handheld computer and
  data collection products, which together comprised 82% of our revenues in the
  first quarter of 2010 compared to 68% in the first quarter last year, at below
  overall average product margins. Additional margin declines in the first quarter
  of 2010 were due to our fixed overhead costs, which comprise a greater portion
  of the overall cost of goods sold due to lower revenues in the first quarter
  of 2010 compared to the same quarter one year ago.</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Research and Development
  Expense<br>
  </b></font><font face="Times New Roman, Times, serif">Research and development
  expense in the first quarter of 2010 was $0.7 million, a decrease of 12%, or
  $0.1 million, compared to $0.8 million in the first quarter of 2009. Over half
  of the reduction in research and development expense in the first quarter of
  2010 was due to lower personnel costs. Additional reductions in research and
  development expense in the first quarter of 2010 were from reduced development
  costs due to a reduction in product development activities, and reduced equipment
  costs related to the reductions in product development activities. Research
  and development expense in the second quarter of 2010 is expected to continue
  at a level similar to the first quarter.<br>
  <br>
  <br>
  </font></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">18<br>
  </font>
<p align=center>
<hr width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
</p>
<p><font face="Times New Roman, Times, serif"><b>Sales and Marketing Expense</b><br>
  Sales and marketing expense for the first quarter of 2010 was $1.2 million,
  a decrease of 12%, or $0.2 million, compared to $1.4 million in the first quarter
  of 2009. Half of the reduction in sales and marketing expense in the first quarter
  of 2010 was due to reduced personnel costs. Sales and marketing expense in the
  first quarter of 2010 was also lower in the categories of advertising and promotion
  expense and travel costs. Sales and marketing expense in the second quarter
  of 2010 is expected to continue at a level similar to the first quarter.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>General and Administrative
  Expense<br>
  </b></font>General and administrative expense for the first quarter of 2010
  was $661,000, an increase of 3% compared to $642,000 in the first quarter of
  2009. General and administrative expense is expected to decline in the second
  quarter of 2010 from first quarter levels due to the absence of professional
  fees and other expenses related to the costs of our annual audit and stockholder
  communications which are expensed in the fourth and first quarters.</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Amortization of Intangibles<br>
  </b></font>In July 2004 we acquired a patent which covers the design and functioning
  of plug-in bar code scanners, bar code imagers, and radio frequency identification
  products. The patent was purchased for $600,000 and capitalized as an intangible
  asset. The patent is being amortized on a straight line basis over a ten-year
  period. Intangible assets of $571,000 remaining from a prior acquisition in
  2000 consisted of developed software and technology with estimated lives at
  the time of acquisition of 8.5 years. Such amount was fully amortized in the
  first quarter of 2009. Amortization charges for the three months ended March
  31, 2010 and 2009 for all acquired intangibles were $15,000 and $32,000, respectively.
  Future intangible amortization charges are solely related to the patent acquired
  in 2004, and will be $15,000 per quarter going forward until fully amortized.</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Interest Income and
  Expense<br>
  </b></font>Interest income reflects interest earned on cash balances. Interest
  income in the first quarter of 2010 and 2009 was immaterial in each of the periods,
  reflecting low average rates of return on cash balances.</p>
<p><font face="Times New Roman, Times, serif">Interest expense in the first quarter
  of 2010 was $48,000 compared to interest expense of $65,000 in the same period
  one year ago. Interest expense is related to interest on amounts drawn on our
  bank lines of credit and interest on equipment lease financing obligations.
  Lower interest expense in the first quarter of 2010 is due to lower average
  balances outstanding on our bank lines of credit in the first quarter of 2010
  compared to the same period one year ago. Interest expense in the second quarter
  of 2010 is expected to continue at levels similar to the first quarter.</font></p>
<p><font face="Times New Roman, Times, serif"><b>Taxes</b><br>
  There were no provisions for federal or state income taxes for the three months
  ended March 31, 2010. We have not generated taxable income in any periods in
  any jurisdiction, foreign or domestic. The Company has maintained a full valuation
  allowance for all deferred tax assets. Deferred tax assets and liabilities are
  determined based on differences between the financial reporting and the tax
  bases of assets and liabilities, and are measured using enacted tax rates and
  laws that will be in effect when the differences are expected to reverse. We
  record a valuation allowance against deferred tax assets when it is more likely
  than not that such assets will not be realized. There can be no assurance that
  the deferred tax assets subject to the valuation allowance will be realized.<br>
  <br>
  </font></p>
<p>&nbsp;</p>
<p></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">19<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p>Deferred tax expense in the first quarter of 2009 was related entirely to the
  deferred tax liability on the portion of our goodwill amortized for tax purposes.
  Due to the indefinite characteristic of this deferred tax liability, it could
  not be offset against deferred tax assets, and therefore resulted in a deferred
  tax expense of $8,000 in the first quarter of 2009. Goodwill impairment charges
  recorded as of December 31, 2009 on that portion of our goodwill being amortized
  for tax purposes, resulted in the reversal of accumulated deferred tax expense
  and the related deferred tax liability, temporarily eliminating the difference
  between financial and tax reporting. As a result no deferred tax expense was
  incurred in the first quarter of 2010.</p>
<p><font face="Times New Roman, Times, serif"><b>Liquidity and Capital Resources</b><br>
  We were unprofitable in the first quarter of 2010. We were profitable in the
  third quarter of 2009 due in part to the gain on the sale of our serial product
  line assets. We were unprofitable in each of other three quarters of 2009, unprofitable
  for fiscal year 2009, and unprofitable in each of the quarters in fiscal years
  2008, 2007, and 2006. We were profitable in two quarters in 2005, but unprofitable
  for fiscal year 2005. Fiscal year 2004 was the only profitable year in our history,
  and only to the extent of $288,000. Prior to 2004, we incurred significant operating
  losses in each financial period since our inception. We may continue to be unprofitable
  in the foreseeable future. Historically we have financed our operations through
  the sale of equity securities, equipment financing, and revolving bank lines
  of credit. Since our inception we have raised approximately $41 million in equity
  capital to fund our operations.</font></p>
<p>As reflected in our Statements of Cash Flows, net cash used in operating activities
  was $0.4 million in the first quarter 2010 compared to cash provided from operating
  activities of $0.2 million in the first quarter of 2009. We calculate net cash
  used in or provided by operating activities by reducing our net loss ($1.0 million
  and $0.7 million in the first quarters of 2010 and 2009, respectively) by those
  expenses that did not require the use of cash, and reversing gains or losses
  that did not generate or use cash. These items consist of stock based compensation
  expense, depreciation and amortization, amortization of intangible assets, net
  foreign currency transaction gains, deferred tax expense and change in deferred
  rent. These amounts totaled $0.3 million in the first quarter of 2010 and 2009.
  In addition, we report increases in assets and reductions in liabilities as
  uses of cash and decreases in assets and increases in liabilities as sources
  of cash, together referred to as changes in operating assets and liabilities.
  In the first quarter of 2010 changes in operating assets and liabilities resulted
  in a net source of cash of $0.4 million and were primarily from increases in
  accounts payable due to timing of payments, increases in accrued payroll and
  related expense, increases in deferred service revenue due to increased service
  billings, and reductions in inventory levels as a result of planned reductions
  from year end levels, partially offset by increases in accounts receivable due
  to increases in overall shipments in the first quarter 2010 and the timing of
  those shipments later in the quarter compared to the previous quarter, and increases
  in prepaid expenses. Changes in working capital balances in the first quarter
  of 2009 resulted in a source of cash of $0.6 million and were primarily from
  reductions in inventory, due primarily to reduced stocking levels of our mobile
  handheld computer as a result of actively managing overall inventory levels
  downward from year end levels, reductions in accounts receivable due to lower
  shipments in the first quarter of 2009 compared to the previous quarter, and
  increases in deferred service revenue due to increased service billings, partially
  offset by reductions in accounts payable due to reductions in overall expenses
  and inventory purchases in the first quarter that created those payables, and
  reductions in deferred income on shipments to distributors due to lower stocking
  levels of our products in the distribution channel.</p>
<P>&nbsp;</P>
<p align=center><font face="Times New Roman, Times, serif" size="3">20<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=left>Cash used in investing activities was $46,000 in the first quarter
  of 2010 compared to $88,000 in the first quarter of 2009. Reductions in investing
  activities in the first quarter of 2010 reflects reductions in equipment and
  tooling purchases due to fewer development projects requiring these expenditures.
<p align=left>Cash provided by financing activities was $0.5 million in the first
  quarter of 2010 compared to $0.6 million in the first quarter of 2009. Financing
  activities in the first quarter of 2010 consisted of a net increase in the amounts
  drawn on our bank lines of credit and proceeds from the exercise of stock options,
  partially offset by payments on capital leases. Financing activities in the
  first quarter of 2009 consisted primarily of a net increase in the amounts drawn
  on our bank lines of credit.
<p align=left>Our cash balances at March 31, 2010 were $2.0 million, including
  cash of $1.5 million drawn against our bank line of credit. Our cash balances
  at March 31, 2010, reflect a net increase of $0.5 million in amounts drawn on
  our bank lines of credit for the first quarter of 2010, partially offset by
  net cash used of $0.4 million in operating activities. On March 3, 2010, we
  agreed with our bank to extend the term of the existing credit facility to March
  23, 2011, to amend the terms of the credit facility with a minimum cash deposit
  requirement of $1.0 million and minimum quarterly revenue requirements for fiscal
  2010, to extend the period of forbearance related to our fourth quarter 2009
  covenant default, and to provide that the bank would waive that event of default
  if we met the requisite financial covenants for the first quarter of 2010. We
  failed to meet the minimum revenue covenant for the quarter ended March 31,
  2010, however, on May 12, 2010 the bank agreed to waive the events of default
  and to replace the quarterly minimum revenue requirements with quarterly net
  income targets for the remaining quarters of fiscal 2010 (see &quot;Note 4 -
  Bank Financing Arrangements&quot; for more information). Our balance sheet at
  March 31, 2010 has a current ratio (current assets divided by current liabilities)
  of 0.9 to 1.0, and no material long term debt. We have taken actions to reduce
  our expenses to align our cost structure with current economic conditions. We
  have the ability to reduce expenses further if necessary.
<p align=left>The Company's continued operating losses, declines in our working
  capital balances and our failure to achieve the revenue levels required to maintain
  compliance with our bank line covenants are conditions that raise doubt about
  the Company's ability to continue as a going concern. Our ability to continue
  as a going concern is dependent upon our ability to establish profitable operations
  and to increase our capital. We have been taking steps intended to reduce operating
  losses and achieve profitability including the introduction of new products,
  continued close support of our distributors and of our application partners
  as they establish their mobile applications in key vertical markets, and management
  of our costs. We believe that we will be able to improve liquidity and secure
  additional sources of financing by managing our working capital balances, returning
  to compliance with the bank line covenants as operating results improve, and
  raising additional capital as needed, including development funding from development
  partners and through the issuance of additional equity securities. There can
  be no assurance that we will be successful in achieving any of these steps,
  and there can be no assurance that additional financing will be available on
  acceptable terms, if at all, and any such terms may be dilutive to existing
  stockholders. Our inability to secure and maintain the necessary liquidity would
  have a material adverse effect on our financial condition and results of operations.
  If we are unable to secure the necessary capital for our business, we may need
  to suspend some or all of our current operations. The financial statements do
  not include any adjustments to reflect the possible future effects on the recoverability
  and classification of assets or the amounts and classification of assets and
  liabilities that may result from the outcome of this uncertainty. If we can
  return to revenue growth and attain profitability, we anticipate requirements
  for cash will include funding of higher receivable and inventory balances, and
  increased expenses, including more employees to support our growth and increases
  in salaries, benefits, and related support costs for employees.
<p align=left>&nbsp;
<p align=center><font face="Times New Roman, Times, serif" size="3"><br>
  21<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=left><font face="Times New Roman, Times, serif">Our contractual cash
  obligations at March 31, 2010 are outlined in the table below:<br>
  <br>
  </font>
<table width="70%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr>
    <td colspan="2" height="15">&nbsp;</td>
    <td width="4%" height="15">&nbsp;</td>
    <td colspan="18" align="center" nowrap class="border" style="border-bottom: 1px solid #000000" height="15"><font size="3" face="Times New Roman, Times, serif">Payments
      Due by Period</font></td>
    <td width="1%" class="border" height="15">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Contractual
        Obligations</font></div>
    </td>
    <td width="4%"><font face="Times New Roman, Times, serif"><b><font size="3">&nbsp</font></b></font></td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">Total</font></td>
    <td width="1%" class="border">&nbsp;</td>
    <td class="border" width="4%">&nbsp;</td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">Less
      than<br>
      1 year</font></td>
    <td width="1%" class="border">&nbsp;</td>
    <td width="4%" class="border">&nbsp;</td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">1
      to 3<br>
      years</font></td>
    <td width="1%" class="border">&nbsp;</td>
    <td width="4%" class="border">&nbsp;</td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">4
      to 5<br>
      years</font></td>
    <td width="1%" class="border">&nbsp;</td>
    <td width="4%" class="border">&nbsp;</td>
    <td colspan="2" align="center" nowrap class="border" valign="bottom" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">More
      than<br>
      5 years</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2" align="left" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Capital leases</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" bgcolor="#cceeff" width="1%"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td align="right" width="8%" nowrap bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">41,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">13,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">27,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">1,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff" valign="bottom"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">Operating
        leases</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap><font size="3" face="Times New Roman, Times, serif">880,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap><font size="3" face="Times New Roman, Times, serif">385,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap ><font size="3" face="Times New Roman, Times, serif">495,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" valign="bottom">&nbsp;</td>
    <td align="right" width="8%" nowrap><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2" align="left" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Bank line of credit</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,467,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">1,467,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Unconditional purchase obligations with contract manufacturers</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">2,710,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">2,710,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" valign="bottom" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Total contractual cash obligations </font></div>
    </td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">5,098,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">4,575,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">522,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" valign="bottom" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
</table>
<p>&nbsp;</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Off-Balance Sheet Arrangements<br>
  </b></font>We have no off-balance sheet arrangements as defined in Item 303
  of Regulation S-K. </p>
<p align=left><font face="Times New Roman, Times, serif"><b>Recent Accounting
  Pronouncements<br>
  </b>See Note 1 of &quot;Notes to Condensed Financial Statements&quot; of this
  Quarterly Report for additional information regarding the status of recent accounting
  pronouncements.</font>
<p align=left> <font face="Times New Roman, Times, serif" size="3"><br>
  </font>
<p align=left><font face="Times New Roman, Times, serif"><b>Item 3. Quantitative
  and Qualitative Disclosures About Market Risk</b></font><font face="Times New Roman, Times, serif" size="3"><a
name=qqd></a></font>
<p align=left><font face="Times New Roman, Times, serif"><b>Interest Rate Risk</b>
  </font>
<p align=left>Our exposure to market risk for changes in interest rates relates
  primarily to invested cash and our bank credit line facilities. Our cash is
  invested in short-term money market investments backed by U.S. Treasury notes
  and other investments that mature within one year and whose principal is not
  subject to market rate fluctuations. Accordingly, interest rate declines would
  adversely affect our interest income but would not affect the carrying value
  of our cash investments. Based on a sensitivity analysis of our cash investments
  during the quarter ended March 31, 2010, a decline of 1% in interest rates would
  not have had a material effect on our quarterly interest income.
<p align=left>Our bank credit line facilities of up to $2.5 million have variable
  interest rates based upon the greater of either 6% or the lender's prime rate
  plus 2%, for both the domestic line (up to $1.5 million) and the international
  line (up to $1.0 million). Accordingly, interest rate increases could increase
  our interest expense on our outstanding credit line balances. Based on a sensitivity
  analysis, an increase of 1% in the interest rate would increase our borrowing
  costs by $15,200 for each $1 million of borrowings against our credit facility,
  if outstanding for the entire year, or a maximum of $38,000 if we utilized our
  entire credit line (in cases where the applicable interest rate is greater than
  6%). The credit line agreement also specifies a fixed collateral handling fee
  of 0.62% per month on the full amount of the accounts receivable provided as
  collateral for the outstanding balances advanced under the credit line. Prior
  to the third quarter of 2009 the fixed collateral handling fee was 0.7% per
  month. <br>
  <br>
  <br>
<p align=left>&nbsp;
<p align=center><font face="Times New Roman, Times, serif" size="3">22<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=left><font face="Times New Roman, Times, serif"><b>Foreign Currency Risk</b>
  </font>
<p align=left>A substantial majority of our revenue, expense and purchasing activities
  are transacted in U.S. dollars. However, we require our European distributors
  to purchase our products in Euros, we pay the expenses of our European employees
  in Euros and British pounds, and we may enter into selected future purchase
  commitments with foreign suppliers that may be paid in the local currency of
  the supplier. We hedge a significant portion of our European receivables balance
  denominated in Euros to reduce the foreign currency risk associated with these
  assets, and we have not been subject to significant losses from material foreign
  currency fluctuations. Based on a sensitivity analysis of our net foreign currency
  denominated assets and expenses at the beginning, during and at the end of the
  quarter ended March 31, 2010, an adverse change of 10% in exchange rates would
  have resulted in an increase in our net loss for the first quarter 2010 of approximately
  $39,900, if left unprotected. For the first quarter of 2010 the total net adjustment
  for the effects of changes in foreign currency on cash balances, collections,
  payables, and derivatives was immaterial. We will continue to monitor, assess,
  and mitigate through hedging activities, the risk associated with these exposures.
<p align=left><br>
  <font face="Times New Roman, Times, serif"><b>Item 4T. Controls and Procedures</b>
  </font><font face="Times New Roman, Times, serif" size="3"><a
name=item4></a></font> <font face="Times New Roman, Times, serif"> </font>
<p><font face="Times New Roman, Times, serif"><i>Conclusion Regarding the Effectiveness
  of Disclosure Controls and Procedures </i></font></p>
<p>Our management evaluated, with the participation of our Chief Executive Officer
  and our Chief Financial Officer, the effectiveness of our disclosure controls
  and procedures as of the end of the period covered by this Quarterly Report
  on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our
  Chief Financial Officer have concluded that our disclosure controls and procedures
  are effective to ensure that information we are required to disclose in reports
  that we file or submit under the Securities Exchange Act of 1934 is (i) recorded,
  processed, summarized and reported within the time periods specified in Securities
  and Exchange Commission rules and forms, and (ii) accumulated and communicated
  to our management, including our Chief Executive Officer and our Chief Financial
  Officer, as appropriate to allow timely decisions regarding required disclosure.</p>
<p><font face="Times New Roman, Times, serif"><i>Changes in Internal Control Over
  Financial Reporting</i></font></p>
<p>There was no change in our internal control over financial reporting that occurred
  during the period covered by this Quarterly Report on Form 10-Q that has materially
  affected, or is reasonably likely to materially affect, our internal control
  over financial reporting.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3"><br>
  23<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=oth></a></font>
<p><font face="Times New Roman, Times, serif"><b>PART II. OTHER INFORMATION </b>
  </font></p>
<p><font face="Times New Roman, Times, serif"><b>Item 1A. Risk Factors</b></font><font face="Times New Roman, Times, serif" size="3"><a
name=risk></a></font><font face="Times New Roman, Times, serif"><b> </b></font></p>
<p align=left><font face="Times New Roman, Times, serif"><i>The risks described
  in this Quarterly Report on Form 10-Q are not the only risks facing our Company.
  Additional risks and uncertainties not currently known to us or that we currently
  deem to be immaterial also may materially adversely affect our business, financial
  condition, and operating results. </i></font>
<p align=left><b>Our ability to continue as a going concern is dependent upon
  our ability to establish profitable operations and to raise additional capital.</b>
<p align=left>The financial statements in our annual report on Form 10-K were
  prepared on a going concern basis. Our continued operating losses, declines
  in our working capital balances and our failure to achieve the revenue levels
  required to maintain compliance with our bank line covenants are conditions
  that raise doubt about the Company's ability to continue as a going concern.
  Our ability to continue as a going concern is dependent upon our ability to
  establish profitable operations and to raise additional financing. We have been
  taking steps intended to reduce operating losses and achieve profitability including
  the introduction of new products, continued close support of our distributors
  and of our application partners as they establish their mobile applications
  in key vertical markets, and management of our costs. We believe that we will
  be able to improve our liquidity and secure additional sources of financing
  by managing our working capital balances, returning to compliance with the bank
  line covenants as operating results improve, and raising additional capital
  as needed, including development funding from development partners and the issuance
  of additional equity securities. Nonetheless, there can be no assurance that
  we will be successful in achieving any of these steps, and there can be no assurance
  that additional financing will be available on acceptable terms, if at all,
  and any such terms may be dilutive to existing stockholders. Our inability to
  secure and maintain the necessary liquidity would have a material adverse effect
  on our financial condition and results of operations. Our financial statements
  do not include any adjustments to reflect the possible future effects on the
  recoverability and classification of assets or the amounts and classification
  of assets and liabilities that may result from the outcome of this uncertainty.
<p align=left><font face="Times New Roman, Times, serif"><b>The global economic
  financial crisis may continue to have an impact on our business and financial
  condition in ways that we currently cannot predict, and may further limit our
  ability to raise additional funds. </b></font>
<p align=left>The continued credit crisis and related turmoil in the global financial
  system may continue to have an impact on our business and our financial condition.
  We may face significant challenges if economic conditions and conditions in
  the financial markets do not improve or continue to worsen. In particular, should
  these conditions cause our revenues to be materially less than forecast, we
  may find it necessary to initiate further reductions in our expenses and defer
  additional product development programs. In addition, our ability to access
  the capital markets and raise funds required for our operations may be severely
  restricted at a time when we would like, or need, to do so, which could have
  an adverse effect on our ability to meet our current and future funding requirements
  and on our flexibility to react to changing economic and business conditions.
<p align=left>&nbsp;
<p align=center><font face="Times New Roman, Times, serif" size="3">24<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=left><b>If we do not maintain compliance with the financial covenants
  in our bank line, which we are dependent upon as a source of cash for our operations,
  we may lose our ability to draw upon it and the bank may accelerate our obligation
  to repay the amounts due.</b>
<p align=left>We are dependent upon our bank line under loan agreements with Silicon
  Valley Bank as a source of cash to fund our operations. The availability of
  the bank line is conditioned upon our complying with the terms of the loan agreements,
  including meeting certain financial covenants. We have failed to meet certain
  of these financial covenants since April 2009, and most recently we failed to
  meet the minimum revenue covenant for the quarter ended March 31, 2010. Each
  time the Company has failed to meet its financial covenants under the bank line,
  Silicon Valley Bank has agreed to forbear from declaring an event of default
  on the bank line and has agreed to amend the financial covenants. On May 12,
  2010, the bank agreed to waive the events of default and agreed to replace the
  quarterly minimum revenue requirements with quarterly net income requirements
  for the remaining quarters of fiscal 2010. The Company also continues to be
  required to maintain a cash balance of $1 million in accounts at Silicon Valley
  Bank. Should we continue to fail to meet any of the financial covenants specified
  in the credit facility agreement as amended, such failure would constitute an
  event of default under the terms of the credit agreement, and Silicon Valley
  Bank may among its remedies, declare all obligations under the credit facility
  immediately due and payable. Should the bank line become unavailable, we may
  not be able to find alternative sources of financing, and we may not be able
  to pay our liabilities and expenses when due, which could require us to suspend
  some or all of our current operations. It could also adversely affect the willingness
  of our vendors and employees to continue to work with us. As of March 31, 2010,
  we had $1,466,809 outstanding under the loan agreements, and we had $1,982,524
  of unrestricted cash and cash equivalents at the bank. Our ability to meet the
  minimum revenue targets and maintain a cash balance at the required minimum
  level for compliance with the financial covenants is dependent on a number of
  factors, including our ability to (i) achieve sufficient revenues, (ii) manage
  our expenses, (iii) manage payment terms with our customers and suppliers, and
  (iv) manage our inventory levels. We can provide no assurance that we will be
  able to meet the requirements under any of the financial covenants under the
  loan agreements.
<p align=left><font face="Times New Roman, Times, serif"><b>We have a history
  of operating losses and may not achieve ongoing profitability. </b></font>
<p>We were unprofitable in the first quarter of 2010. We were profitable in the
  third quarter of 2009 due to the one time gain on the sale of our serial product
  line assets. We were unprofitable in each of other three quarters of 2009, unprofitable
  for fiscal year 2009 as a whole, and unprofitable in each of the quarters in
  fiscal years 2008, 2007, and 2006. We were profitable in two quarters in 2005,
  but unprofitable for fiscal year 2005 as a whole. Fiscal year 2004 was the only
  profitable year in our history, and only to the extent of $288,000. Prior to
  2004, we incurred significant operating losses in each financial period since
  our inception. To achieve ongoing profitability, we must accomplish numerous
  objectives, including growth in our business and the development of successful
  new products. We cannot foresee with any certainty whether we will be able to
  achieve these objectives in the future. Accordingly, we may not generate sufficient
  net revenue or manage our expenses sufficiently to achieve ongoing profitability.
  If we cannot achieve ongoing profitability, we will not be able to support our
  operations from positive cash flows, and we would use our existing cash and
  bank line of credit to support operating losses. If we are unable to secure
  the necessary capital to replace that cash, we may need to suspend some or all
  of our current operations.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3"><br>
  25<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><font face="Times New Roman, Times, serif"><b>We may require additional capital
  in the future, but that capital may not be available, if at all, on reasonable
  terms or on terms that would not cause substantial dilution to your stock holdings.</b></font></p>
<p>We may incur operating losses in future quarters and would need to raise capital
  to fund such losses. Our forecasts are highly dependent on factors beyond our
  control, including market acceptance of our products and deployments by businesses
  of applications that use our handheld computers and our data collection products.
  If capital requirements vary materially from those currently planned, we may
  require additional capital sooner than expected. There can be no assurance that
  such capital will be available in sufficient amounts or on terms acceptable
  to us, if at all. </p>
<p><font face="Times New Roman, Times, serif"><b>Our quarterly operating results
  may fluctuate in future periods, which could cause our stock price to decline.</b></font></p>
<p>We expect to experience quarterly fluctuations in operating results in the
  future. We generally ship orders as received, and as a result we may have little
  backlog. Quarterly revenues and operating results therefore depend on the volume
  and timing of orders received during the quarter, which are difficult to forecast.
  Historically, we have often recognized a substantial portion of our revenue
  in the last month of the quarter. This subjects us to the risk that even modest
  delays in orders may adversely affect our quarterly operating results. Our operating
  results may also fluctuate due to factors such as:</p>
<ul>
  <li><font face="Times New Roman, Times, serif" size="3">the demand for our products;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">the size and timing
    of customer orders;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">unanticipated delays
    or problems in our introduction of new products and product enhancements;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">the introduction of
    new products and product enhancements by our competitors;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">the timing of the introduction
    and deployments of new applications that work with our products;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">changes in the revenues
    attributable to royalties and engineering development services;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">product mix;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">timing of software enhancements;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">changes <font size="3">in the
    level of operating expenses;<br>
    </font></font></li>
  <li><font face="Times New Roman, Times, serif" size="3">competitive conditions
    in the industry including competitive pressures resulting in lower average
    selling prices;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">timing of distributors' shipments
    to their customers; and</font></li>
  <li><font face="Times New Roman, Times, serif">general economic conditions and
    conditions specific to our customers' industries.</font></li>
</ul>
<p>Because we base our staffing and other operating expenses on anticipated revenues,
  unanticipated declines or delays in the receipt of orders can cause significant
  variations in operating results from quarter to quarter. As a result of any
  of the foregoing factors, or a combination, our results of operations in any
  given quarter may be below the expectations of public market analysts or investors,
  in which case the market price of our Common Stock would be adversely affected.<br>
  <br>
</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">26<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><font face="Times New Roman, Times, serif"><b>If third-parties do not produce
  and sell innovative products with which our products are compatible, or if our
  own line of mobile handheld computers is not successful, we may not achieve
  our sales projections.</b></font></p>
<p><font face="Times New Roman, Times, serif">Our success has been dependent upon
  the ability of third-parties in the mobile computer industry to successfully
  develop products that include or are compatible with our technology and then
  to sell these products into the marketplace. Even if we are successful in marketing
  and selling our new line of mobile handheld computers, our ability to generate
  increased revenue depends significantly on the commercial success of other parties'
  Windows mobile products, particularly vertical market software applications
  for use with our handheld computer and peripheral products, and standard Pocket
  PC handhelds, phone-integrated devices, tablet computers, and other phone-integrated
  devices, including those from Palm, Nokia, and Blackberry, with which our plug-in
  and wireless peripherals can be used, and the adoption of these mobile computer
  devices for business use. A number of manufacturers of handheld computers have
  reduced the number of handheld products they offer, or curtailed development
  of future handheld computer products. If manufacturers are unable or choose
  not to ship new products such as Pocket PC and other Windows mobile devices,
  or experience difficulties with new product transitions that cause delays in
  the market as we have experienced in the past three years, or if these products
  fail to achieve or maintain market acceptance, the number of our potential new
  customers could be reduced and we may not be able to meet our sales expectations.
  </font></p>
<p><font face="Times New Roman, Times, serif"><b>If we fail to develop and introduce
  new products rapidly and successfully, we will not be able to compete effectively,
  and our ability to generate sufficient revenues will be negatively affected.</b></font></p>
<p>The market for our products is prone to rapidly changing technology, evolving
  industry standards and short product life cycles. If we are unsuccessful at
  developing and introducing new products and services on a timely basis that
  include the latest technologies conforming to the newest standards and that
  are appealing to end users, we will not be able to compete effectively, and
  our ability to generate significant revenues will be seriously harmed.</p>
<p>The development of new products and services can be very difficult and requires
  high levels of innovation. The development process is also lengthy and costly.
  Short product life cycles expose our products to the risk of obsolescence and
  require frequent new product introductions. We will be unable to introduce new
  products and services into the market on a timely basis and compete successfully,
  if we fail to:</p>
<ul>
  <li><font face="Times New Roman, Times, serif">invest significant resources
    in research and development, sales and marketing, and customer support;<font size="3"><br>
    </font></font></li>
  <li><font face="Times New Roman, Times, serif">identify emerging trends, demands
    and standards in the field of mobile computing products;<font size="3"><br>
    </font></font></li>
  <li><font face="Times New Roman, Times, serif">enhance our products by adding
    additional features; <font size="3"><br>
    </font></font></li>
  <li><font face="Times New Roman, Times, serif" size="3">maintain superior or
    competitive performance in our products; and<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">anticipate our end users' needs
    and technological trends accurately.</font></li>
</ul>
<p>We cannot be sure that we will have sufficient resources to make adequate investments
  in research and development or that we will be able to identify trends or make
  the technological advances necessary to be competitive.<br>
  <br>
</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">27<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><font face="Times New Roman, Times, serif"><b>A significant portion of our
  revenue currently comes from two distributors, and any decrease in revenue from
  these distributors could harm our business. </b></font> </p>
<p>A significant portion of our revenue comes from two distributors, Tech Data
  Corporation and Ingram Micro Inc., which together represented approximately
  29% and 35% of our worldwide revenues in the first quarter of 2010 and fiscal
  year 2009, respectively. We expect that a significant portion of our revenue
  will continue to depend on sales to Tech Data Corporation and Ingram Micro Inc.
  Additionally, 18% of our revenue in the first quarter 2010 came from our distributor
  BlueStar. We do not have long-term commitments from Tech Data Corporation, Ingram
  Micro Inc. or BlueStar, to carry our products. Each could choose to stop selling
  some or all of our products at any time, and each of these companies also carries
  our competitors' products. If we lose our relationship with Tech Data Corporation,
  Ingram Micro Inc. or BlueStar, we would experience disruption and delays in
  marketing our products.</p>
<p><b>If the market for mobile computers experiences delays, or fails to grow,
  we may not achieve our sales projections. </b></p>
<p>Substantially all of our peripheral products are designed for use with mobile
  computers, including handhelds, notebooks, tablets, and handhelds with integrated
  phones. If the mobile computer industry does not grow, if its growth slows,
  or if product or operating system changeovers by mobile computer manufacturers
  and partners cause delays in the market, or if the markets for our mobile handheld
  computers do not grow, or if the impact of the global economic financial crisis
  continues, we may not achieve our sales projections.</p>
<p><font face="Times New Roman, Times, serif"><b>Our sales will be hurt if the
  new technologies used in our products do not become widely adopted, or are adopted
  slower than expected.</b></font></p>
<p>Many of our products use new technologies, such as two dimensional bar code
  scanning and radio frequency identification, which are not yet widely adopted
  in the market. If these technologies fail to become widespread, or are adopted
  slower than expected, our sales will suffer.</p>
<p align=left><font face="Times New Roman, Times, serif"><b>We could face increased
  competition in the future, which would adversely affect our financial performance.
  </b> </font>
<p align=left><font face="Times New Roman, Times, serif">The market for mobile
  handheld computers in which we operate is very competitive. Our future financial
  performance is contingent on a number of unpredictable factors, including that:
  </font>
<ul>
  <li><font face="Times New Roman, Times, serif">some of our competitors have
    greater financial, marketing, and technical resources than we do; </font></li>
  <li><font face="Times New Roman, Times, serif">we periodically face intense
    price competition, particularly when our competitors have excess inventories
    and discount their prices to clear their inventories; and</font></li>
  <li><font face="Times New Roman, Times, serif">certain OEMs of personal computers,
    mobile phones and handheld computers offer products with built-in functions,
    such as Bluetooth wireless technology, Wi-Fi, or bar code scanning, that compete
    with our products.</font></li>
</ul>
<p>Increased competition could result in price reductions, fewer customer orders,
  reduced margins, and loss of market share. Our failure to compete successfully
  against current or future competitors could harm our business, operating results
  and financial condition.<br>
  <br>
</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">28</font>
</p>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=left><font face="Times New Roman, Times, serif"><b>If we do not correctly
  anticipate demand for our products, our operating results will suffer.</b></font>
<p>The demand for our products depends on many factors and is difficult to forecast.
  We expect that it will become more difficult to forecast demand given current
  economic conditions, as we introduce and support more products, and as competition
  in the market for our products intensifies. If demand is lower than forecasted
  levels, we could have excess production resulting in higher inventories of finished
  products and components, which could lead to write-downs or write-offs of some
  or all of the excess inventories, and reductions in our cash balances. Lower
  than forecasted demand could also result in excess manufacturing capacity at
  our third-party manufacturers and in our failure to meet minimum purchase commitments,
  each of which may lower our operating results.</p>
<p align=left>If demand increases beyond forecasted levels, we would have to rapidly
  increase production at our third-party manufacturers. We depend on suppliers
  to provide additional volumes of components, and suppliers might not be able
  to increase production rapidly enough to meet unexpected demand. Even if we
  were able to procure enough components, our third-party manufacturers might
  not be able to produce enough of our devices to meet our customer demand. In
  addition, rapid increases in production levels to meet unanticipated demand
  could result in higher costs for manufacturing and supply of components and
  other expenses. These higher costs could lower our profit margins. Further,
  if production is increased rapidly, manufacturing yields could decline, which
  may also lower operating results.
<p><font face="Times New Roman, Times, serif"><b>We rely primarily on distributors,
  resellers, vertical industry partners, and OEMs to sell our products, and our
  sales would suffer if any of these third-parties stops selling our products
  effectively.</b></font></p>
<p>Because we sell our products primarily through distributors, resellers, vertical
  industry partners, and OEMs, we are subject to risks associated with channel
  distribution, such as risks related to their inventory levels and support for
  our products. Our distribution channels may build up inventories in anticipation
  of growth in their sales. If such growth in their sales does not occur as anticipated,
  the inventory build up could contribute to higher levels of product returns.
  The lack of sales by any one significant participant in our distribution channels
  could result in excess inventories and adversely affect our operating results
  and working capital liquidity.</p>
<p align=left>Our agreements with distributors, resellers, vertical industry partners,
  and OEMs are generally nonexclusive and may be terminated on short notice by
  them without cause. Our distributors, resellers, vertical industry partners,
  and OEMs are not within our control, are not obligated to purchase products
  from us, and may offer competitive lines of products simultaneously. Sales growth
  is contingent in part on our ability to enter into additional distribution relationships
  and expand our sales channels. We cannot predict whether we will be successful
  in establishing new distribution relationships, expanding our sales channels
  or maintaining our existing relationships. A failure to enter into new distribution
  relationships or to expand our sales channels could adversely impact our ability
  to grow our sales.
<p align=left>We allow our distribution channels to return a portion of their
  inventory to us for full credit against other purchases. In addition, in the
  event we reduce our prices, we credit our distributors for the difference between
  the purchase price of products remaining in their inventory and our reduced
  price for such products. Actual returns and price protection may adversely affect
  future operating results and working capital liquidity by reducing our accounts
  receivable and increasing our inventory balances, particularly since we seek
  to continually introduce new and enhanced products and are likely to face increasing
  price competition.<br>
  <br>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">29<br>
  </font> </p>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><font face="Times New Roman, Times, serif"><b>We depend on alliances and other
  business relationships with a small number of third-parties, and a disruption
  in any one of these relationships would hinder our ability to develop and sell
  our products.</b></font></p>
<p align=left><font face="Times New Roman, Times, serif">We depend on strategic
  alliances and business relationships with leading participants in various segments
  of the communications and mobile handheld computer markets to help us develop
  and market our products. Our strategic partners may revoke their commitment
  to our products or services at any time in the future or may develop their own
  competitive products or services. Accordingly, our strategic relationships may
  not result in sustained business alliances, successful product or service offerings,
  or the generation of significant revenues. Failure of one or more of such alliances
  could result in delay or termination of product development projects, failure
  to win new customers, or loss of confidence by current or potential customers.
  </font>
<p align=left>We have devoted significant research and development resources to
  design activities for Windows Mobile, Windows CE, Windows 7/Vista/XP, RIM Blackberry,
  and Nokia Symbian for E Series operating systems, and more recently, to develop
  our own family of mobile handheld computers. Such design activities have diverted
  financial and personnel resources from other development projects. These design
  activities are not undertaken pursuant to any agreement under which Microsoft,
  Research In Motion, or Symbian is obligated to continue the collaboration or
  to support the products produced from the collaboration. Consequently, these
  organizations may terminate their collaborations with us for a variety of reasons,
  including our failure to meet agreed-upon standards or for reasons beyond our
  control, such as changing market conditions, increased competition, discontinued
  product lines, and product obsolescence.
<p align=left><font face="Times New Roman, Times, serif"><b>Our intellectual property
  and proprietary rights may be insufficient to protect our competitive position.
  </b> </font>
<p>Our business depends on our ability to protect our intellectual property. We
  rely primarily on patent, copyright, trademark, trade secret laws, and other
  restrictions on disclosure to protect our proprietary technologies. We cannot
  be sure that these measures will provide meaningful protection for our proprietary
  technologies and processes. We cannot be sure that any patent issued to us will
  be sufficient to protect our technology. The failure of any patents to provide
  protection to our technology would make it easier for our competitors to offer
  similar products. In connection with our participation in the development of
  various industry standards, we may be required to license certain of our patents
  to other parties, including our competitors, that develop products based upon
  the adopted standards.</p>
<p><font face="Times New Roman, Times, serif">We also generally enter into confidentiality
  agreements with our employees, distributors, and strategic partners, and generally
  control access to our documentation and other proprietary information. Despite
  these precautions, it may be possible for a third-party to copy or otherwise
  obtain and use our products, services, or technology without authorization,
  develop similar technology independently, or design around our patents.<br>
  <br>
  </font></p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">30<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p>Effective copyright, trademark, and trade secret protection may be unavailable
  or limited in certain foreign countries. Furthermore, certain of our customers
  have entered into agreements with us which provide that the customers have the
  right to use our proprietary technology in the event we default in our contractual
  obligations, including product supply obligations, and fail to cure the default
  within a specified period of time.</p>
<p><font face="Times New Roman, Times, serif"><b>We may become subject to claims
  of intellectual property rights infringement, which could result in substantial
  liability.</b></font></p>
<p>In the course of operating our business, we may receive claims of intellectual
  property infringement or otherwise become aware of potentially relevant patents
  or other intellectual property rights held by other parties. Many of our competitors
  have large intellectual property portfolios, including patents that may cover
  technologies that are relevant to our business. In addition, many smaller companies,
  universities, and individuals have obtained or applied for patents in areas
  of technology that may relate to our business. The industry is moving towards
  aggressive assertion, licensing, and litigation of patents and other intellectual
  property rights. In June 2007, we received a letter from Wi-LAN, Inc., claiming
  that certain of our wireless LAN products infringe on two U.S. and one Canadian
  patent held by Wi-LAN, Inc. In October 2007, Wi-LAN, Inc. filed patent infringement
  lawsuits against a number of companies alleging that those companies infringe
  the two U.S. patents by manufacturing, using, or offering for sale products
  with wireless capability compliant with the IEEE 802.11 standards. Wi-LAN, Inc.
  is asking for money damages and a court order barring the sale of products that
  use the patented technology. We have not been named in the lawsuit, and we do
  not plan to make any changes to our current business at this time. Nonetheless,
  we may be added to the lawsuit in the future, and even if we are not, the outcome
  of this lawsuit may result in future changes to our business, including potential
  increased costs for those of our products that make use of the related technology.</p>
<p>If we are unable to obtain and maintain licenses on favorable terms for intellectual
  property rights required for the manufacture, sale, and use of our products,
  particularly those products which must comply with industry standard protocols
  and specifications to be commercially viable, our results of operations or financial
  condition could be adversely impacted.</p>
<p>In addition to disputes relating to the validity or alleged infringement of
  other parties' rights, we may become involved in disputes relating to our assertion
  of our own intellectual property rights. Whether we are defending the assertion
  of intellectual property rights against us or asserting our intellectual property
  rights against others, intellectual property litigation can be complex, costly,
  protracted, and highly disruptive to business operations by diverting the attention
  and energies of management and key technical personnel. Plaintiffs in intellectual
  property cases often seek injunctive relief, and the measures of damages in
  intellectual property litigation are complex and often subjective or uncertain.
  Thus, any adverse determinations in this type of litigation could subject us
  to significant liabilities and costs. <br>
  <br>
</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">31<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><b>New industry standards may require us to redesign our products, which could
  substantially increase our operating expenses.</b></p>
<p>Standards for the form and functionality of our products are established by
  standards committees. These independent committees establish standards, which
  evolve and change over time, for different categories of our products. We must
  continue to identify and ensure compliance with evolving industry standards
  so that our products are interoperable and we remain competitive. Unanticipated
  changes in industry standards could render our products incompatible with products
  developed by major hardware manufacturers and software developers. Should any
  major changes, even if anticipated, occur, we would be required to invest significant
  time and resources to redesign our products to ensure compliance with relevant
  standards. If our products are not in compliance with prevailing industry standards
  for a significant period of time, we would miss opportunities to sell our products
  for use with new hardware components from mobile computer manufacturers and
  OEMs, thus affecting our business.</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Undetected flaws and
  defects in our products may disrupt product sales and result in expensive and
  time-consuming remedial action.</b></font></p>
<p>Our hardware and software products may contain undetected flaws, which may
  not be discovered until customers have used the products. From time to time,
  we may temporarily suspend or delay shipments or divert development resources
  from other projects to correct a particular product deficiency. Efforts to identify
  and correct errors and make design changes may be expensive and time consuming.
  Failure to discover product deficiencies in the future could delay product introductions
  or shipments, require us to recall previously shipped products to make design
  modifications, or cause unfavorable publicity, any of which could adversely
  affect our business and operating results.</p>
<p><font face="Times New Roman, Times, serif"><b>The loss of one or more of our
  senior personnel could harm our existing business.</b></font></p>
<p>A number of our officers and senior managers have been employed for fifteen
  to eighteen years by us, including our President, Executive Vice President,
  Chief Financial Officer, and Chief Technical Officer. Our future success will
  depend upon the continued service of key officers and senior managers. Competition
  for officers and senior managers is intense, and there can be no assurance that
  we will be able to retain our existing senior personnel. The loss of one or
  more of our officers or key senior managers could adversely affect our ability
  to compete. </p>
<p><b>The expensing of options continues to reduce our operating results and may
  continue to cause us to incur net losses such that we may find it necessary
  to change our business practices to attract and retain employees.</b></p>
<p>Historically, we have used stock options as a key component of our employee
  compensation packages. We believe that stock options provide an incentive to
  our employees to maximize long-term stockholder value and, through the use of
  vesting, encourage valued employees to remain with us. The expensing of employee
  stock options adversely affected our net income and earnings per share in the
  first quarter of 2010 and in each of the quarters in fiscal 2009, will continue
  to adversely affect future quarters, and will make profitability harder to achieve.
  In addition, we may decide in response to the effects of expensing stock options
  on our operating results to reduce the number of stock options granted to employees
  or to grant options to fewer employees. This could adversely affect our ability
  to retain existing employees and attract qualified candidates, and also could
  increase the cash compensation we would have to pay to them.<br>
  <br>
</p>
<p><font face="Times New Roman, Times, serif"><br>
  </font></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">32<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><font face="Times New Roman, Times, serif"><b>If we are unable to attract and
  retain highly skilled sales and marketing and product development personnel,
  our ability to develop and market new products and product enhancements will
  be adversely affected.</b></font></p>
<p>We believe our ability to achieve increased revenues and to develop successful
  new products and product enhancements will depend in part upon our ability to
  attract and retain highly skilled sales and marketing and product development
  personnel. Our products involve a number of new and evolving technologies, and
  we frequently need to apply these technologies to the unique requirements of
  mobile products. Our personnel must be familiar with both the technologies we
  support and the unique requirements of the products to which our products connect.
  Competition for such personnel is intense, and we may not be able to attract
  and retain such key personnel. In addition, our ability to hire and retain such
  key personnel will depend upon our ability to raise capital or achieve increased
  revenue levels to fund the costs associated with such key personnel. Failure
  to attract and retain such key personnel will adversely affect our ability to
  develop and market new products and product enhancements.</p>
<p><font face="Times New Roman, Times, serif"><b>We may not be able to collect
  revenues from customers who experience financial difficulties.</b></font></p>
<p>Our accounts receivable are derived primarily from distributors and OEMs. We
  perform ongoing credit evaluations of our customers' financial conditions but
  generally require no collateral from our customers. Reserves are maintained
  for potential credit losses, and such losses have historically been within such
  reserves. However, many of our customers may be thinly capitalized and may be
  prone to failure in adverse market conditions. Although our collection history
  has been good, from time to time a customer may not pay us because of financial
  difficulty, bankruptcy or liquidation. The current global financial crisis may
  have an impact on our customers' ability to pay us in a timely manner, and consequently,
  we may experience increased difficulty in collecting our accounts receivable,
  and we may have to increase our reserves in anticipation of increased uncollectible
  accounts. </p>
<p><font face="Times New Roman, Times, serif" size="3"><b>We may be unable to
  manufacture our products, because we are dependent on a limited number of qualified
  suppliers for our components.</b></font></p>
<p>Several of our component parts, including our serial interface chip, our Ethernet
  chip, our bar code scanning modules, and our new line of mobile handheld computers,
  are produced by one or a limited number of suppliers. Shortages could occur
  in these essential components due to an interruption of supply or increased
  demand in the industry. If we are unable to procure certain component parts,
  we could be required to reduce our operations while we seek alternative sources
  for these components, which could have a material adverse effect on our financial
  results. To the extent that we acquire extra inventory stocks to protect against
  possible shortages, we would be exposed to additional risks associated with
  holding inventory, such as obsolescence, excess quantities, or loss.</p>
<p align="left"><font face="Times New Roman, Times, serif"><b>Our operating results
  could be harmed by economic, political, regulatory and other risks associated
  with export sales.</b></font></p>
<p>Export sales (sales to customers outside the United States) accounted for approximately
  26% and 42% of our revenue in the first quarters of 2010 and fiscal 2009, respectively.
  Accordingly, our operating results are subject to the risks inherent in export
  sales, including:</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">33<br>
  </font>
<p align=center>
<hr width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font></p>
<ul>
  <li><font face="Times New Roman, Times, serif" size="3">longer payment cycles;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">unexpected changes in
    regulatory requirements, import and export restrictions and tariffs;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">difficulties in managing
    foreign operations;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">the <font size="3">burdens of
    complying with a variety of foreign laws;<br>
    </font></font></li>
  <li><font face="Times New Roman, Times, serif" size="3">greater difficulty or
    delay in accounts receivable collection;<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif" size="3">potentially adverse
    tax consequences; and<br>
    </font></li>
  <li><font face="Times New Roman, Times, serif">political and economic instability.</font></li>
</ul>
<p>Our export sales are primarily denominated in United States dollars and in
  Euros for our sales to European distributors. Accordingly, an increase in the
  value of the United States dollar relative to foreign currencies could make
  our products more expensive and therefore potentially less competitive in foreign
  markets. Declines in the value of the Euro relative to the United States dollar
  may result in foreign currency losses relating to collection of Euro denominated
  receivables if left unhedged.</p>
<p><font face="Times New Roman, Times, serif"><b>Our operations are vulnerable
  to interruption by fire, earthquake, power loss, telecommunications failure,
  and other events beyond our control.</b></font></p>
<p>Our corporate headquarters is located near an earthquake fault. The potential
  impact of a major earthquake on our facilities, infrastructure, and overall
  business is unknown. Additionally, we may experience electrical power blackouts
  or natural disasters that could interrupt our business. Should a disaster be
  widespread, such as a major earthquake, or result in the loss of key personnel,
  we may not be able to implement our disaster recovery plan in a timely manner.
  Any losses or damages incurred by us as a result of these events could have
  a material adverse effect on our business.</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Failure to maintain
  effective internal controls could have a material adverse effect on our business,
  operating results and stock price.</b></font></p>
<p>We have evaluated and will continue to evaluate our internal control procedures
  in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act,
  which requires an annual management assessment of the design and effectiveness
  of our internal control over financial reporting. If we fail to maintain the
  adequacy of our internal controls, as such standards are modified, supplemented
  or amended from time to time, we may not be able to ensure that we can conclude
  on an ongoing basis that we have effective internal control over financial reporting
  in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective
  internal controls, particularly those related to revenue recognition, are necessary
  for us to produce reliable financial reports and are important to helping prevent
  financial fraud. If we cannot provide reliable financial reports or prevent
  fraud, our business and operating results could be harmed, investors could lose
  confidence in our reported financial information, and the trading price of our
  stock could drop significantly.</p>
<p><b>The sale of a substantial number of shares of our Common Stock could cause
  the market price of our Common Stock to decline.</b></p>
<p>Sales of a substantial number of shares of our Common Stock in the public market
  could adversely affect the market price for our Common Stock. The market price
  of our Common Stock could also decline if one or more of our significant stockholders
  decided for any reason to sell substantial amounts of our Common Stock in the
  public market.<br>
  <br>
</p>
<p>&nbsp;</p>
<p></p>
<p></p>
<p></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">34<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p>As of May 7, 2010, we had 3,793,879 shares of Common Stock outstanding. Substantially
  all of these shares are freely tradable in the public market, either without
  restriction or subject, in some cases, only to S-3 prospectus delivery requirements
  and, in other cases, only to manner of sale, volume, and notice requirements
  of Rule 144 under the Securities Act.</p>
<p>As of May 7, 2010, we had 1,220,151 shares of Common Stock subject to outstanding
  options under our stock option plans, and 210,896 shares of Common Stock were
  available for future issuance under the plans. We have registered the shares
  of Common Stock subject to outstanding options and reserved for issuance under
  our stock option plans. Accordingly, the shares of Common Stock underlying vested
  options will be eligible for resale in the public market as soon as the options
  are exercised.</p>
<p>As of May 7, 2010, we had 77,642 shares of Common Stock subject to outstanding
  warrants issued in a private placement. We have registered the resale of all
  shares of Common Stock subject to the warrants. Accordingly, the shares of Common
  Stock underlying these warrants will be eligible for resale in the public market
  as soon as the warrants are exercised, subject to S-3 prospectus delivery requirements.</p>
<p><font face="Times New Roman, Times, serif"><b>Volatility in the trading price
  of our Common Stock could negatively impact the price of our Common Stock.</b></font></p>
<p>During the period from January 1, 2009 through May 7, 2010, our Common Stock
  price fluctuated between a high of $5.44 and a low of $1.32. Following a one-for-ten
  reverse stock split effected on October 23, 2008, which significantly decreased
  the Company's share float, we have experienced low trading volumes in our stock,
  and thus relatively small purchases and sales can have a significant effect
  on our stock price. The trading price of our Common Stock could be subject to
  wide fluctuations in response to many factors, some of which are beyond our
  control, including general economic conditions and the outlook of securities
  analysts and investors on our industry. In addition, the stock markets in general,
  and the markets for high technology stocks in particular, have experienced high
  volatility that has often been unrelated to the operating performance of particular
  companies. These broad market fluctuations may adversely affect the trading
  price of our Common Stock.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">35<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a><a
name=item6></a></font>
<p align=left><font face="Times New Roman, Times, serif" size="3"><b>Item 6. Exhibits</b></font>
<p><font face="Times New Roman, Times, serif" size="3"> Exhibits</font></p>
<p><font face="Times New Roman, Times, serif">31.1 Certification of Chief Executive
  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</font></p>
<p><font face="Times New Roman, Times, serif">31.2 Certification of Chief Financial
  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</font></p>
<p><font face="Times New Roman, Times, serif">32.1 Certification of Chief Executive
  Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
  Act of 2002.</font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">36<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=sig></a></font>
<p>&nbsp;</p>
<div align="center"><font face="Times New Roman, Times, serif" size="3"><BR>
  </font></div>
<P align=center><font face="Times New Roman, Times, serif" size="3"><b>SIGNATURES</b></font></P>
<P>&nbsp;</P>
<P>Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant
  has duly caused this report to be signed on its behalf by the undersigned thereunto
  duly authorized.</P>
<P>&nbsp;</P>
<P align=center><font face="Times New Roman, Times, serif" size="3"><U>SOCKET
  MOBILE, INC.<BR>
  </U>Registrant</font></P>
<P>&nbsp;
<TABLE cols=2 width="89%">
  <TR>
    <TD width="38%"><font face="Times New Roman, Times, serif" size="3">Date:
      May 14, 2010 </font></TD>
    <TD width="21%">
      <CENTER>
        <font face="Times New Roman, Times, serif"></font>
      </CENTER>
    </TD>
    <TD width="41%">
      <DIV align=left><font face="Times New Roman, Times, serif" size="3"><U>&nbsp;&nbsp;/s/
        Kevin J. Mills</U></font></DIV>
    </TD>
  </TR>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif"></font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif" size="3">&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="41%">
      <div align=left>
        <p><font face="Times New Roman, Times, serif" size="3">Kevin J. Mills<br>
          President and Chief Executive Officer</font><font face="Times New Roman, Times, serif"><br>
          (Duly Authorized Officer and Principal Executive Officer)</font></p>
      </div>
    </td>
  </tr>
  <tr>
    <td width="38%" height="44"><font face="Times New Roman, Times, serif"></font></td>
    <td width="21%" height="44"><font face="Times New Roman, Times, serif"></font></td>
    <td width="41%" height="44"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif" size="3">Date:
      May 14, 2010 </font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif"></font>
      </center>
    </td>
    <td width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size="3"><u>&nbsp;&nbsp;/s/
        David W. Dunlap&nbsp;&nbsp;</u></font></div>
    </td>
  </tr>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif"></font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif" size="3">&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size="3">David
        W. Dunlap<br>
        Vice President of Finance and Administration and Chief Financial Officer
        <br>
        (Duly Authorized Officer and Principal Financial and Accounting Officer)
        </font></div>
    </td>
  </tr>
</TABLE>
<P>&nbsp;</P>
<P>&nbsp;</P>
<p align=center><font face="Times New Roman, Times, serif" size="3">37<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=ind></a></font>
<P>&nbsp;</P>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>Index to
  Exhibits</b><br>
  <br>
  </font></p>
<table cellspacing=0 cellpadding=0 width=800 align=center border=0>
  <tr>
    <td valign=bottom width="10%" height=48>
      <p align=center><font face="Times New Roman, Times, serif" size="3">Exhibit
        <u>Number</u></font></p>
    </td>
    <td valign=bottom width="90%" height=48>
      <p align=center><font face="Times New Roman, Times, serif" size="3"><u>Description
        </u></font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width="10%" height=25>
      <p align=right><font face="Times New Roman, Times, serif"></font></p>
    </td>
    <td valign=top width="90%" height=25>
      <p><font face="Times New Roman, Times, serif"></font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width="10%" height=30>
      <p align=center><font face="Times New Roman, Times, serif" size="3">31.1&nbsp;</font>
      </p>
    </td>
    <td valign=top width="90%" height=30>
      <p>Certification of Chief Executive Officer pursuant to Section 302 of the
        Sarbanes-Oxley Act of 2002.</p>
    </td>
  </tr>
  <tr>
    <td valign=top width="10%" height=30>
      <p align=center><font face="Times New Roman, Times, serif" size="3">31.2&nbsp;</font>
      </p>
    </td>
    <td valign=top width="90%" height=30>
      <p>Certification of Chief Financial Officer pursuant to Section 302 of the
        Sarbanes-Oxley Act of 2002.</p>
    </td>
  </tr>
  <tr>
    <td valign=top width="10%" height=30>
      <p align=center><font face="Times New Roman, Times, serif" size="3">32.1&nbsp;</font>
      </p>
    </td>
    <td valign=top width="90%" height=30>
      <p>Certification of Chief Executive Officer and Chief Financial Officer
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</p>
    </td>
  </tr>
</table>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<p align=center><font face="Times New Roman, Times, serif" size="3">38<br>
  </font>
<p align=center>
<hr width="100%">
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>2
<FILENAME>exhibit311.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<html>
<head>
<title>Untitled Document</title>
</head>

<body bgcolor="#FFFFFF">
<p align=left>
<p align=right><font face="Times New Roman, Times, serif" size="3">Exhibit 31.1
  </font>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><b>CERTIFICATION</b></font></p>
<p><font face="Times New Roman, Times, serif">I, Kevin J. Mills, certify that:</font></p>
<p><font face="Times New Roman, Times, serif" size="3">1. I have reviewed this
  quarterly report on Form 10-Q of Socket Mobile, Inc.;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">2. Based on my knowledge,
  this report does not contain any untrue statement of a material fact or omit
  to state a material fact necessary to make the statements made, in light of
  the circumstances under which such statements were made, not misleading with
  respect to the period covered by this report;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">3. Based on my knowledge,
  the financial statements, and other financial information included in this report,
  fairly present in all material respects the financial condition, results of
  operations and cash flows of the registrant as of, and for, the periods presented
  in this report;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">4. The registrant's other
  certifying officer and I are responsible for establishing and maintaining disclosure
  controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
  and internal control over financial reporting (as defined in Exchange Act Rules
  13a-15(f) and 15d-15(f)) for the registrant and have:</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(a) Designed such disclosure
  controls and procedures, or caused such disclosure controls and procedures to
  be designed under our supervision, to ensure that material information relating
  to the registrant is made known to us by others within those entities, particularly
  during the period in which this report is being prepared;</font></p>
<p><font face="Times New Roman, Times, serif">(b) Designed such internal control
  over financial reporting, or caused such internal control over financial reporting
  to be designed under our supervision, to provide reasonable assurance regarding
  the reliability of financial reporting and the preparation of financial statements
  for external purposes in accordance with generally accepted accounting principles;</font></p>
<p><font face="Times New Roman, Times, serif">(c) Evaluated the effectiveness
  of the registrant's disclosure controls and procedures and presented in this
  report our conclusions about the effectiveness of the disclosure controls and
  procedures, as of the end of the period covered by this report based on such
  evaluation; and</font></p>
<p><font face="Times New Roman, Times, serif">(d) Disclosed in this report any
  change in the registrant's internal control over financial reporting that occurred
  during the registrant's most recent fiscal quarter (the registrant's fourth
  fiscal quarter in the case of an annual report) that has materially affected,
  or is reasonably likely to materially affect, the registrant's internal control
  over financial reporting; and</font></p>
<p><font face="Times New Roman, Times, serif" size="3">5. The registrant's other
  certifying officer and I have disclosed, based on our most recent evaluation
  of internal control over financial reporting, to the registrant's auditors and
  the audit committee of the registrant's board of directors (or persons performing
  the equivalent functions):</font></p>
<p><font face="Times New Roman, Times, serif">(a) All significant deficiencies
  and material weaknesses in the design or operation of internal control over
  financial reporting which are reasonably likely to adversely affect the registrant's
  ability to record, process, summarize and report financial information; and</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(b) Any fraud, whether
  or not material, that involves management or other employees who have a significant
  role in the registrant's internal control over financial reporting.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  <br>
  </font></p>
<table cols=2 width="97%">
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif" size="3">Date:
      May 14, 2010 </font></td>
    <td width="17%">
      <center>
      </center>
    </td>
    <td width="45%">
      <div align=left><font face="Times New Roman, Times, serif" size="3"><u>By:
        /s/ Kevin J. Mills</u></font></div>
    </td>
  </tr>
  <tr>
    <td width="38%">&nbsp;</td>
    <td width="17%">
      <center>
        <font face="Times New Roman, Times, serif" size="3">&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="45%">
      <div align=left><font face="Times New Roman, Times, serif" size="3">Name:
        Kevin J. Mills<br>
        Title: President and Chief Executive Officer (Principal Executive Officer)</font></div>
    </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  </font></p>
<p align=center>&nbsp;
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>3
<FILENAME>exhibit312.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<html>
<head>
<title>Untitled Document</title>
</head>

<body bgcolor="#FFFFFF">
<p align=right><font face="Times New Roman, Times, serif" size="3">Exhibit 31.2
  </font>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><b>CERTIFICATION</b></font>
</p>
<p><font face="Times New Roman, Times, serif"><br>
  I, David W. Dunlap, certify that:</font></p>
<p><font face="Times New Roman, Times, serif" size="3">1. I have reviewed this
  quarterly report on Form 10-Q of Socket Mobile, Inc.;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">2. Based on my knowledge,
  this report does not contain any untrue statement of a material fact or omit
  to state a material fact necessary to make the statements made, in light of
  the circumstances under which such statements were made, not misleading with
  respect to the period covered by this report;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">3. Based on my knowledge,
  the financial statements, and other financial information included in this report,
  fairly present in all material respects the financial condition, results of
  operations and cash flows of the registrant as of, and for, the periods presented
  in this report;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">4. The registrant's other
  certifying officer and I are responsible for establishing and maintaining disclosure
  controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
  and internal control over financial reporting (as defined in Exchange Act Rules
  13a-15(f) and 15d-15(f)) for the registrant and have:</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(a) Designed such disclosure
  controls and procedures, or caused such disclosure controls and procedures to
  be designed under our supervision, to ensure that material information relating
  to the registrant is made known to us by others within those entities, particularly
  during the period in which this report is being prepared;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(b) Designed such internal
  control over financial reporting, or caused such internal control over financial
  reporting to be designed under our supervision, to provide reasonable assurance
  regarding the reliability of financial reporting and the preparation of financial
  statements for external purposes in accordance with generally accepted accounting
  principles;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(c) Evaluated the effectiveness
  of the registrant's disclosure controls and procedures and presented in this
  report our conclusions about the effectiveness of the disclosure controls and
  procedures, as of the end of the period covered by this report based on such
  evaluation; and</font></p>
<p><font face="Times New Roman, Times, serif">(d) Disclosed in this report any
  change in the registrant's internal control over financial reporting that occurred
  during the registrant's most recent fiscal quarter (the registrant's fourth
  fiscal quarter in the case of an annual report) that has materially affected,
  or is reasonably likely to materially affect, the registrant's internal control
  over financial reporting; and</font></p>
<p><font face="Times New Roman, Times, serif" size="3">5. The registrant's other
  certifying officer and I have disclosed, based on our most recent evaluation
  of internal control over financial reporting, to the registrant's auditors and
  the audit committee of the registrant's board of directors (or persons performing
  the equivalent functions):</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(a) All significant deficiencies
  and material weaknesses in the design or operation of internal control over
  financial reporting which are reasonably likely to adversely affect the registrant's
  ability to record, process, summarize and report financial information; and</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(b) Any fraud, whether
  or not material, that involves management or other employees who have a significant
  role in the registrant's internal control over financial reporting.</font></p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  <br>
  </font></p>
<table cols=2 width="96%">
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif" size="3">Date:
      May 14, 2010 </font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif"><font face="Times New Roman, Times, serif"></font></font>
      </center>
    </td>
    <td width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size="3"><u>By:
        /s/ David W. Dunlap&nbsp;&nbsp;</u></font></div>
    </td>
  </tr>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif"></font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif" size="3">&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size="3">Name:
        David W. Dunlap<br>
        Title: Vice President of Finance and Administration and Chief Financial
        Officer (Principal Financial Officer) </font></div>
    </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  </font></p>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>4
<FILENAME>exhibit321.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<html>
<head>
<title>Untitled Document</title>
</head>

<body bgcolor="#FFFFFF">
<p align=right><font face="Times New Roman, Times, serif" size="3">Exhibit 32.1</font>
<p align="center">CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL
  OFFICER<br>
  PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  I, Kevin J. Mills, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
  to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report
  of Socket Mobile, Inc. on Form 10-Q for the quarter ended March 31, 2010 fully
  complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
  Act of 1934 and that information contained in such Quarterly Report on Form
  10-Q fairly presents in all material respects the financial condition and results
  of operations of Socket Mobile, Inc.</font></p>
<p>&nbsp;</p>
<div align="right"></div>
<table cols=2 width="43%" align="right">
  <tr>
    <td width="41%">
      <div align=left><font face="Times New Roman, Times, serif"
      size=3><u>By: &nbsp;&nbsp;/s/ Kevin J. Mills</u></font></div>
    </td>
  </tr>
  <tr>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size=3>Name:
        Kevin J. Mills<br>
        Title: &nbsp&nbspPresident and Chief Executive Officer <br>
        &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp(Principal Executive
        Officer)<br>
        Date: &nbspMay 14, 2010</font></div>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>I, David W. Dunlap, certify, pursuant to 18 U.S.C. Section 1350, as adopted
  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
  Report of Socket Mobile, Inc. on Form 10-Q for the quarter ended March 31, 2010
  fully complies with the requirements of Section 13(a) or 15(d) of the Securities
  Exchange Act of 1934 and that information contained in such Quarterly Report
  on Form 10-Q fairly presents in all material respects the financial condition
  and results of operations of Socket Mobile, Inc.</p>
<p>&nbsp;</p>
<p align="right"></p>
<table cols=2 width="43%" align="right">
  <tr>
    <td width="41%">
      <div align=left><font face="Times New Roman, Times, serif"
      size=3><u>By: &nbsp;&nbsp;/s/ David W. Dunlap&nbsp;&nbsp;</u></font></div>
    </td>
  </tr>
  <tr>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size=3>Name:
        David W. Dunlap<br>
        Title: &nbspVice President of Finance and Administration <br>
        &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbspand Chief Financial
        Officer (Principal <br>
        &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbspFinancial Officer)<br>
        Date:&nbsp&nbspMay 14, 2010</font></div>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p align=center>&nbsp;
<p align=center>&nbsp;
</body>
</html>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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